Earnings Management in Banking Industry And Its Impact on The Firm Value
DOI:
https://doi.org/10.26740/jaj.v10n1.p69-84Keywords:
Earnings Management, Firm Value, IFRS, Income-Increasing, Income-Decreasing.Abstract
This research investigates earnings management through discretionary accruals in pre and post period of convergence of IFRS and analyses its impact on the firm value in Indonesian banking industry. The sample of this research was 23 banks listed in Indonesia Stock Exchange over period of 2007-2014. The method of this research is quantitative. The data are analyzed using the non-paramateric Wilcoxon Signed Ranks and the multiple regression. The result of this research found that accrual earnings management has no the mean difference in pre and post period of convergence of IFRS. Based on the effect of earnings management on banking firm value, it was found that banking earnings management has an impact on the increase of the firm value. This research further identifies the patterns in accrual earnings management including income-increasing and income-decreasing. Both patterns induced managers to increase the firm value. This research also found that that income-decreasing pattern has a stronger impact on the increase of the firm value than income-increasing pattern.
References
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Abdallah, S. (2018). External auditor type, discretionary accruals and investors reactions. Journal of Accounting in Emerging Economies. doi:10.1108/jaee-10-2017-0098
Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28(1), 125. doi:10.1016/s0165-4101(99)00017-8
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Alishah, S.Z., Butt, S. A. & Hasan, A. (2009). Corporate Governance and Earnings Management an Empirical Evidence from Pakistani Listed Companies. European Journal of Scientific Research, Vol. 26, No. 4, pp. 624-638.
Anggraita, V. (2012). Dampak Penerapan PSAK 50/55 (Revisi 2006) terhadap Manajemen Laba di Perbankan: Peranan Mekanisme Corporate Governance, Struktur Kepemilikan, dan Kualitas Audit. Paper presented in Accounting National Symposium XV, Banjarmasin, Indonesia.
Ararat, M., Black, B. S., & Yurtoglu, B. B. (2014). Corporate Governance, Business Groups, and Market Value: Time-Series Evidence from Turkey. SSRN Electronic Journal. doi:10.2139/ssrn.2277768
Beaver, W., Eger, C., Ryan, S., & Wolfson, M. (1989). Financial Reporting, Supplemental Disclosures, and Bank Share Prices. Journal of Accounting Research, 27(2), 157.
doi:10.2307/2491230
Beaver, W. H., & Engel, E. E. (1996). Discretionary behavior with respect to allowances for loan losses and the behavior of security prices. Journal of Accounting and Economics, 22(1-3), 177206. doi:10.1016/s0165-4101(96)00428-4
Cheng, Q., Warfield, T., & Ye, M. (2011). Equity Incentives and Earnings Management. Journal of Accounting, Auditing & Finance, 26(2), 317349. doi:10.1177/0148558x11401219
Cornett, M. M., McNutt, J. J., & Tehranian, H. (2009). Corporate governance and earnings management at large U.S. bank holding companies. Journal of Corporate Finance, 15(4), 412430. doi:10.1016/j.jcorpfin.2009.04.003
Deegan, C. (2007). Australian Financial Accounting, Fifth Edition, McGraw-Hill, Australia.
Dumontier, P., & Raffournier, B. (2002). Accounting and capital markets: a survey of the European evidence. European Accounting Review, 11(1), 119151. doi:10.1080/09638180220124761
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons, 13(4), 365383.
doi:10.2308/acch.1999.13.4.365
Hussein, S. K., & Venkatram, R. (2013). Corporate Governance and Firms Value: An Empirical Analysis of Agri-input Firm in India. International Journal of Commerce, Business and Management, 2 (6), 353-362.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305360.
doi:10.1016/0304-405x(76)90026-x
Jiraporn, P., Miller, G. A., Yoon, S. S., & Kim, Y. S. (2008). Is earnings management opportunistic or beneficial? An agency theory perspective. International Review of Financial Analysis, 17(3), 622634. doi:10.1016/j.irfa.2006.10.005
Laela, S. F. (2012). Kualitas Laba Dan Corporate Governance: Benarkah Kualitas Laba Bank Syariah Lebih Rendah Dari Bank Konvensional? Jurnal Akuntansi Dan Keuangan Indonesia, 9(1), 2242. doi:10.21002/jaki.2012.02
Lin, F.-L. (2011). Is earnings management opportunistic or beneficial in Taiwan? International Journal of Economics and Finance, 3(1). doi:10.5539/ijef.v3n1p133
Mansur, H., & Tangl, A. (2018). The Effect of Corporate Governance on the Financial Performance of Listed Companies In Amman Stock Exchange (Jordan). Journal of Advanced Management Science, 6(2), 97-102. DOI:10.18178/joams.6.2.97-102.
Manzalawy, S.M. and Rwegasira K. (2012). The Practice of Earnings Management in the Middle East Emerging Stock Markets: Why and How is it Done? A Case Study of Egypt. International Journal of Business and Commerce, 2(10), 1-14.
Marchini, P. L., Mazza, T., & Medioli, A. (2018). Related party transactions, corporate governance and earnings management. Corporate Governance: The International Journal of Business in Society. doi:10.1108/cg-11-2017-0271
Mardnly, Z., Mouselli, S., & Abdulraouf, R. (2018). Corporate governance and firm performance: an empirical evidence from Syria. International Journal of Islamic and Middle Eastern Finance and Management, 11(4), 591607. doi:10.1108/imefm-05-2017-0107
Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings. Managerial Auditing Journal, 32(1), 5074. doi:10.1108/maj-01-2016-1304
Omid, A. M. (2012). Type of Earnings Management and the Effects Debt Contracts, Future Earnings Growth Forecast and Sales Growth: Evidence from Iran. School of Doctoral Studies (European Union). Journal, 1(1), 7-16
Oosterbosch, R.V. (2009). Earnings Management in the Banking Industry: The Consequences of IFRS Implementation on Discretionary Use of Loan Loss Provision, Thesis, Erasmus University, Rotterdam.
Rezaei, F., & Roshani, M. (2012). Efficient or Opportunistic Earnings Management with Regards to the of Firm Size and Corporate Governance Practices. Interdisciplinary Journal of Contemporary Research in Business, 3 (9), 1312-1322.
Raoli, E. (2013). Do Managers Engage In Earnings Management To Support Firms Market Valuation? Corporate Ownership and Control, 10(2).
doi:10.22495/cocv10i2c3art5
Salleh, N.M. N.Z., & Hassan, M.H.C. (2014). Audit Committee and Earnings Management: Pre and Post MCCG. International Review of Management and Business Research, 3 (1), 307-318.
Santy, P., Tawakkal., & Pontoh, G.T. (2013). Pengaruh Adopsi IFRS terhadap Manajemen Laba pada Perusahaan Perbankan di Bursa Efek Indonesia. Thesis, Universitas Hasanuddin, Indonesia.
Sayari, S., Omri, A., Finet, A., & Harrathi, H. (2013). The Impact of Earnings Management on Stock Returns: the Case of Tunisian Firms. International Research Journal of Accounting and Auditing, 1(1), 7-21.
Scott, W.R. (2009). Financial Accounting Theory, Fifth Edition, Pearson Education, Toronto, Canada.
Tangjitprom, N. (2013). The Role of Corporate Governance in Reducing the Negative Effect of Earnings Management. International Journal of Economics and Finance, 5(3). doi:10.5539/ijef.v5n3p213
Tobing, W.R.L. and Anggorowati, N.I. (2009). Perataan Laba Melalui Penyisihan Penghapusan Aktiva Produktif (PPAP) Sektor Perbankan. Akuntabilitas, 9 (1), 50-62.
Tornyeva, K., & Wereko, T. (2012). Corporate Governance and Firm Performance: Evidence from the Insurance Sector of Ghana. European Journal of Business and Management, 4 (13), 95-112.
Wijayanti, R., & Diyanti, V. (2017). Pengaruh Volatilitas Laba, Perataan Laba dan Corporate Governance terhadap Kualitas Laba Bank Syariah dan Konvensional. Jurnal Akuntansi Dan Investasi, 18(1). doi:10.18196/jai.18161
Vajriyanti, E., Widanaputra., & Asri D.P. (2015). Pengaruh Manajemen Laba Riil pada Nilai Perusahaan dengan Good Corporate Governance sebagai Variabel Pemoderasi. Paper presented in Accounting National Symposium XVIII, Medan, Indonesia.
Abdallah, S. (2018). External auditor type, discretionary accruals and investors reactions. Journal of Accounting in Emerging Economies. doi:10.1108/jaee-10-2017-0098
Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: a reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28(1), 125. doi:10.1016/s0165-4101(99)00017-8
Akdogan, Y. E., & Boyacioglu, M. A. (2014). The effect of corporate governance on firm performance: a case of Turkey. International Journal of Critical Accounting, 6(2), 187.
doi:10.1504/ijca.2014.063365
Alishah, S.Z., Butt, S. A. & Hasan, A. (2009). Corporate Governance and Earnings Management an Empirical Evidence from Pakistani Listed Companies. European Journal of Scientific Research, Vol. 26, No. 4, pp. 624-638.
Anggraita, V. (2012). Dampak Penerapan PSAK 50/55 (Revisi 2006) terhadap Manajemen Laba di Perbankan: Peranan Mekanisme Corporate Governance, Struktur Kepemilikan, dan Kualitas Audit. Paper presented in Accounting National Symposium XV, Banjarmasin, Indonesia.
Ararat, M., Black, B. S., & Yurtoglu, B. B. (2014). Corporate Governance, Business Groups, and Market Value: Time-Series Evidence from Turkey. SSRN Electronic Journal. doi:10.2139/ssrn.2277768
Beaver, W., Eger, C., Ryan, S., & Wolfson, M. (1989). Financial Reporting, Supplemental Disclosures, and Bank Share Prices. Journal of Accounting Research, 27(2), 157.
doi:10.2307/2491230
Beaver, W. H., & Engel, E. E. (1996). Discretionary behavior with respect to allowances for loan losses and the behavior of security prices. Journal of Accounting and Economics, 22(1-3), 177206. doi:10.1016/s0165-4101(96)00428-4
Cheng, Q., Warfield, T., & Ye, M. (2011). Equity Incentives and Earnings Management. Journal of Accounting, Auditing & Finance, 26(2), 317349. doi:10.1177/0148558x11401219
Cornett, M. M., McNutt, J. J., & Tehranian, H. (2009). Corporate governance and earnings management at large U.S. bank holding companies. Journal of Corporate Finance, 15(4), 412430. doi:10.1016/j.jcorpfin.2009.04.003
Deegan, C. (2007). Australian Financial Accounting, Fifth Edition, McGraw-Hill, Australia.
Dumontier, P., & Raffournier, B. (2002). Accounting and capital markets: a survey of the European evidence. European Accounting Review, 11(1), 119151. doi:10.1080/09638180220124761
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons, 13(4), 365383.
doi:10.2308/acch.1999.13.4.365
Hussein, S. K., & Venkatram, R. (2013). Corporate Governance and Firms Value: An Empirical Analysis of Agri-input Firm in India. International Journal of Commerce, Business and Management, 2 (6), 353-362.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305360.
doi:10.1016/0304-405x(76)90026-x
Jiraporn, P., Miller, G. A., Yoon, S. S., & Kim, Y. S. (2008). Is earnings management opportunistic or beneficial? An agency theory perspective. International Review of Financial Analysis, 17(3), 622634. doi:10.1016/j.irfa.2006.10.005
Laela, S. F. (2012). Kualitas Laba Dan Corporate Governance: Benarkah Kualitas Laba Bank Syariah Lebih Rendah Dari Bank Konvensional? Jurnal Akuntansi Dan Keuangan Indonesia, 9(1), 2242. doi:10.21002/jaki.2012.02
Lin, F.-L. (2011). Is earnings management opportunistic or beneficial in Taiwan? International Journal of Economics and Finance, 3(1). doi:10.5539/ijef.v3n1p133
Mansur, H., & Tangl, A. (2018). The Effect of Corporate Governance on the Financial Performance of Listed Companies In Amman Stock Exchange (Jordan). Journal of Advanced Management Science, 6(2), 97-102. DOI:10.18178/joams.6.2.97-102.
Manzalawy, S.M. and Rwegasira K. (2012). The Practice of Earnings Management in the Middle East Emerging Stock Markets: Why and How is it Done? A Case Study of Egypt. International Journal of Business and Commerce, 2(10), 1-14.
Marchini, P. L., Mazza, T., & Medioli, A. (2018). Related party transactions, corporate governance and earnings management. Corporate Governance: The International Journal of Business in Society. doi:10.1108/cg-11-2017-0271
Mardnly, Z., Mouselli, S., & Abdulraouf, R. (2018). Corporate governance and firm performance: an empirical evidence from Syria. International Journal of Islamic and Middle Eastern Finance and Management, 11(4), 591607. doi:10.1108/imefm-05-2017-0107
Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings. Managerial Auditing Journal, 32(1), 5074. doi:10.1108/maj-01-2016-1304
Omid, A. M. (2012). Type of Earnings Management and the Effects Debt Contracts, Future Earnings Growth Forecast and Sales Growth: Evidence from Iran. School of Doctoral Studies (European Union). Journal, 1(1), 7-16
Oosterbosch, R.V. (2009). Earnings Management in the Banking Industry: The Consequences of IFRS Implementation on Discretionary Use of Loan Loss Provision, Thesis, Erasmus University, Rotterdam.
Rezaei, F., & Roshani, M. (2012). Efficient or Opportunistic Earnings Management with Regards to the of Firm Size and Corporate Governance Practices. Interdisciplinary Journal of Contemporary Research in Business, 3 (9), 1312-1322.
Raoli, E. (2013). Do Managers Engage In Earnings Management To Support Firms Market Valuation? Corporate Ownership and Control, 10(2).
doi:10.22495/cocv10i2c3art5
Salleh, N.M. N.Z., & Hassan, M.H.C. (2014). Audit Committee and Earnings Management: Pre and Post MCCG. International Review of Management and Business Research, 3 (1), 307-318.
Santy, P., Tawakkal., & Pontoh, G.T. (2013). Pengaruh Adopsi IFRS terhadap Manajemen Laba pada Perusahaan Perbankan di Bursa Efek Indonesia. Thesis, Universitas Hasanuddin, Indonesia.
Sayari, S., Omri, A., Finet, A., & Harrathi, H. (2013). The Impact of Earnings Management on Stock Returns: the Case of Tunisian Firms. International Research Journal of Accounting and Auditing, 1(1), 7-21.
Scott, W.R. (2009). Financial Accounting Theory, Fifth Edition, Pearson Education, Toronto, Canada.
Tangjitprom, N. (2013). The Role of Corporate Governance in Reducing the Negative Effect of Earnings Management. International Journal of Economics and Finance, 5(3). doi:10.5539/ijef.v5n3p213
Tobing, W.R.L. and Anggorowati, N.I. (2009). Perataan Laba Melalui Penyisihan Penghapusan Aktiva Produktif (PPAP) Sektor Perbankan. Akuntabilitas, 9 (1), 50-62.
Tornyeva, K., & Wereko, T. (2012). Corporate Governance and Firm Performance: Evidence from the Insurance Sector of Ghana. European Journal of Business and Management, 4 (13), 95-112.
Wijayanti, R., & Diyanti, V. (2017). Pengaruh Volatilitas Laba, Perataan Laba dan Corporate Governance terhadap Kualitas Laba Bank Syariah dan Konvensional. Jurnal Akuntansi Dan Investasi, 18(1). doi:10.18196/jai.18161
Vajriyanti, E., Widanaputra., & Asri D.P. (2015). Pengaruh Manajemen Laba Riil pada Nilai Perusahaan dengan Good Corporate Governance sebagai Variabel Pemoderasi. Paper presented in Accounting National Symposium XVIII, Medan, Indonesia.
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2018-10-29
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Abbas, A. (2018). Earnings Management in Banking Industry And Its Impact on The Firm Value. AKRUAL: Jurnal Akuntansi, 10(1), 69–84. https://doi.org/10.26740/jaj.v10n1.p69-84
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