Main Article Content
Abstract
The purpose of this study is to provide empirical evidence on the impact of free cash flow and leverage on revenue management moderated by the variable of good corporate governance. The research sample consisted of 200 data samples drawn from 20 sub-sectors of the company's consumer products on 2011-2020. The sampling technique used was intentional sampling. Data were analyzed by Moderate Regression Analysis (MRA). The testing results show that free cash flow has a significant negative impact on earnings management, leverage has no impact on earnings management, good corporate governance can mitigate free cash flow, and lastly good corporate governance has a negative impact on earnings management. It shows that the effects of leverage cannot be mitigated. Discussion of the findings that are not in accordance with the initial hypothesis is explained in the final section and the implications of this article.
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Copyright (c) 2023 Aprih Santoso
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References
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- Asyiroh, N., & Hartono, U. (2019). Firm size, leverage, profitabilitas, free cash flow, good corporate governance dan earning management: studi pada perusahaan sektor infrastruktur dan transportasi di indonesia. Jurnal Ilmu Manajemen, 7(3), 726-739. https://ejournal.unesa.ac.id/index.php/jim/article/view/28956
- Banimahd, B., & Aliabadi, M. (2013). A study on relationship between earnings management and operating cash flows management: Evidence from Tehran Stock Exchange. Management Science Letters, 3(6), 1677-1682.
- Bassiouny, S. W., Soliman, M. M., & Ragab, A. (2016). The impact of firm characteristics on earnings management: an empirical study on the listed firms in Egypt. The Business & Management Review, 7(2), 91. https://www.proquest.com/conference-papers-proceedings/impact-firm-characteristics-on-earnings/docview/1773195608/se-2?accountid=46437
- Beatty, A., & Weber, J. (2003). The effects of debt contracting on voluntary accounting method changes. The Accounting Review, 78(1), 119-142. https://doi.org/10.2308/accr.2003.78.1.119
- Chalak, S. L., & Mohammadnezhad, S. (2012). Investigation of the relationship between earnings management and free cash flows in firms with high free cash flows and low growth listed in Tehran Securities Exchange. World Applied Sciences Journal, 20(3), 429-437.
- Chow, C. W., & Wong-Boren, A. (1987). Voluntary financial disclosure by Mexican corporations. Accounting Review, 533-541. https://www.jstor.org/stable/247575
- Chung, R., Firth, M., & Kim, J. B. (2005). Earnings management, surplus free cash flow, and external monitoring. Journal of Business Research, 58(6), 766-776. https://doi.org/10.1016/j.jbusres.2003.12.002
- Damayanty, P., Ayuningtyas, M., & Oktaviyanti, O. (2022). The influence of good corporate governance, company size, profitability, and leverage on profit management. Literatus, 4(1), 90-97. https://doi.org/10.37010/lit.v4i1.664
- Dechow, P. M., & Ge, W. (2006). The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly. Review of Accounting Studies, 11, 253-296. https://doi.org/10.1007/s11142-006-9004-1
- Fakhroni, Z., Ghozali, I., Harto, P., & Nur, A. Y. E. (2018). Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange. Investment Management and Financial Innovations, 15(1), 299-310.
- Fields, T. D., Lys, T. Z., & Vincent, L. (2001). Empirical research on accounting choice. Journal of Accounting and Economics, 31(1-3), 255-307. https://doi.org/10.1016/S0165-4101(01)00028-3
- Firnanti, F., & Pirzada, K. (2019). Company characteristics, corporate governance, audit quality impact on earnings management. Acc. Fin. Review, 4(2), 43-49. https://ssrn.com/abstract=3438238
- Ghofir, A., & Yusuf, Y. (2020). Effect of Firm Size and Leverage on Earning Management. Journal of Industrial Engineering & Management Research, 1(3), 218-225. https://doi.org/10.7777/jiemar.v1i3.81
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- Kalbuana, N., Prasetyo, B., Asih, P., Arnas, Y., Simbolon, S. L., Abdusshomad, A., ... & Mahdi, F. M. (2021). Earnings management is affected by firm size, leverage and roa: evidence from Indonesia. Academy of Strategic Management Journal, 20, 1-12. https://www.proquest.com/scholarly-journals/earnings-management-is-affected-firm-size/docview/2541935909/se-2?accountid=46437
- Kodriyah, K., & Fitri, A. (2017). Pengaruh free cash flow dan leverage terhadap manajemen laba pada perusahaan manufaktur di BEI. JAK (Jurnal Akuntansi) Kajian Ilmiah Akuntansi, 4(1), 64-76. https://doi.org/10.30656/jak.v4i1.218
- Kontan (May 17, 2017). Harga saham BBRI turun 3,13% sehari (18/5), ini PER dan PBV-nya. Retrieved from https://investasi.kontan.co.id/news/harga-saham-bbri-turun-313-sehari-185-ini-per-dan-pbv-nya
- Lestari, S. P., & Khafid, M. (2021). The role of company size in moderating the effect of profitability, profit growth, leverage, and liquidity on earnings quality. Accounting Analysis Journal, 10(2), 86-93. https://doi.org/10.15294/aaj.v10i2.45939
- Lupita, I. W., & Meiranto, W. (2019). Pengaruh surplus arus kas bebas, ukuran perusahaan, leverage, dan kualitas audit terhadap manajemen laba. Diponegoro Journal of Accounting, 7(4), 1-11.
- Mwangi, J. G., & Nasieku, T. (2022). Effect of ownership structure on earnings management in listed manufacturing firms at Nairobi Securities Exchange, Kenya. Asian Themes in Social Sciences Research, 6(1), 12-24. https://doi.org/10.33094/atssr.v6i1.66
- Nekhili, M., Amar, I. F. B., Chtioui, T., & Lakhal, F. (2016). Free cash flow and earnings management: The moderating role of governance and ownership. The Journal of Applied Business Research, 32(1), 255-268. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2546877
- Padmini, L. S., & Ratnadi, N. M. D. (2020). The effect of free cash flow, dividend policy, and financial leverage on earnings management. American Journal of Humanities and Social Sciences Research, 4(1), 195-201.
- Ruwanti, G., Chandrarin, G., & Assih, P. (2019). The influence of corporate governance in the relationship of firm size and leverage on earnings management. International Journal of Innovative Science and Research Technology, 4(8), 142-147.
- Salehi, A., Mohammadi, S., & Afshari, M. (2017). Impact of institutional ownership and board independence on the relationship between excess free cash flow and earnings management. Advances in Mathematical Finance and Applications, 2(3), 91-105. https://doi.org/10.5829/idosi.wasj.2012.20.03.2372
- Sari, M. R., Djohanputro, B., & Kountur, R. (2021). Past performance and earnings management: The effect of free cash flow. The Journal of Asian Finance, Economics and Business, 8(1), 37-43. https://doi.org/10.13106/jafeb.2021.vol8.no1.037
- Setiawati, E., Mujiyanti & Rosit, E. (2019), Pengaruh Free Cash Flow dan Leverage Terhadap Revenue Management Dengan Good Corporate Governance Sebagai Variabel Pemoderasi, Dijelaskan:Jurnal Penelitian dan Pengembangan Akuntansi, 13 (1)
- Shafer, W. E. (2015). Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126, 43-60. https://doi.org/10.1007/s10551-013-1989-3
- Surjandari, D. A., Minanari, M., & Nurlaelawati, L. (2021). Good corporate governance, leverage, firm size and earning management: Evidence from Indonesia. International Journal of Commerce and Finance, 7(2), 165-183.
- Susanto, Y. K., & Pradipta, A. (2016). Corporate governance and real earnings management. International Journal of Business, Economics and Law, 9(1), 17-23.
- Swastika, D. L. T. (2013). Corporate governance, firm size, and earning management: Evidence in Indonesia stock exchange. IOSR Journal of Business and Management, 10(4), 77-82.
- Utomo, D., & Pamungkas, I. D. (2018). Cash flow activities and stock returns in manufacturing of indonesia: a moderating role of earning management. Academy of Accounting and Financial Studies Journal, 22(6), 1-10.
- Wijaya, N., Pirzada, K., & Fanady, C. (2020). Determinants of earnings management: An empirical analysis. Journal of Security & Sustainability Issues, 9(4), 1265-1273. http://doi.org/10.9770/jssi.2020.9.4(13
- Wimelda, L., & Chandra, A. (2018). Opportunistic behavior, external monitoring mechanisms, corporate governance, and earnings management. Accounting and Finance Review, 3(1), 44-52.
- Yannizar, Y., Wazirman, W., & Septiana, G. (2020). Analysis of good corporate governance, free cash flow, leverage towards earning management, and shareholder wealth in service sector companies listed on the Indonesia Stock Exchange. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 3(3), 2567-2567v. https://doi.org/10.33258/birci.v3i3.2520
- Yasa, G. S. W., Wirakusuma, M. G., & Suaryana, I. G. N. A. (2020). Effect of leverage, free cash flow, corporate governance, growth and risk management on earnings quality. International Research Journal of Management, IT and Social Sciences, 7(1), 177-184.
References
Alexander, N. (2017). Factors affecting earnings management in the Indonesian Stock Exchange. Journal of Finance and Banking Review, 2(2), 8-14. https://ssrn.com/abstract=3000728
Aman, A., Pourjalali, H., & Teruya, J. (2006). Earnings management in Malaysia: A study on effects of accounting choices. Malaysian Accounting Review, 5(1), 185-209. https://ir.uitm.edu.my/id/eprint/13796
Asyiroh, N., & Hartono, U. (2019). Firm size, leverage, profitabilitas, free cash flow, good corporate governance dan earning management: studi pada perusahaan sektor infrastruktur dan transportasi di indonesia. Jurnal Ilmu Manajemen, 7(3), 726-739. https://ejournal.unesa.ac.id/index.php/jim/article/view/28956
Banimahd, B., & Aliabadi, M. (2013). A study on relationship between earnings management and operating cash flows management: Evidence from Tehran Stock Exchange. Management Science Letters, 3(6), 1677-1682.
Bassiouny, S. W., Soliman, M. M., & Ragab, A. (2016). The impact of firm characteristics on earnings management: an empirical study on the listed firms in Egypt. The Business & Management Review, 7(2), 91. https://www.proquest.com/conference-papers-proceedings/impact-firm-characteristics-on-earnings/docview/1773195608/se-2?accountid=46437
Beatty, A., & Weber, J. (2003). The effects of debt contracting on voluntary accounting method changes. The Accounting Review, 78(1), 119-142. https://doi.org/10.2308/accr.2003.78.1.119
Chalak, S. L., & Mohammadnezhad, S. (2012). Investigation of the relationship between earnings management and free cash flows in firms with high free cash flows and low growth listed in Tehran Securities Exchange. World Applied Sciences Journal, 20(3), 429-437.
Chow, C. W., & Wong-Boren, A. (1987). Voluntary financial disclosure by Mexican corporations. Accounting Review, 533-541. https://www.jstor.org/stable/247575
Chung, R., Firth, M., & Kim, J. B. (2005). Earnings management, surplus free cash flow, and external monitoring. Journal of Business Research, 58(6), 766-776. https://doi.org/10.1016/j.jbusres.2003.12.002
Damayanty, P., Ayuningtyas, M., & Oktaviyanti, O. (2022). The influence of good corporate governance, company size, profitability, and leverage on profit management. Literatus, 4(1), 90-97. https://doi.org/10.37010/lit.v4i1.664
Dechow, P. M., & Ge, W. (2006). The persistence of earnings and cash flows and the role of special items: Implications for the accrual anomaly. Review of Accounting Studies, 11, 253-296. https://doi.org/10.1007/s11142-006-9004-1
Fakhroni, Z., Ghozali, I., Harto, P., & Nur, A. Y. E. (2018). Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange. Investment Management and Financial Innovations, 15(1), 299-310.
Fields, T. D., Lys, T. Z., & Vincent, L. (2001). Empirical research on accounting choice. Journal of Accounting and Economics, 31(1-3), 255-307. https://doi.org/10.1016/S0165-4101(01)00028-3
Firnanti, F., & Pirzada, K. (2019). Company characteristics, corporate governance, audit quality impact on earnings management. Acc. Fin. Review, 4(2), 43-49. https://ssrn.com/abstract=3438238
Ghofir, A., & Yusuf, Y. (2020). Effect of Firm Size and Leverage on Earning Management. Journal of Industrial Engineering & Management Research, 1(3), 218-225. https://doi.org/10.7777/jiemar.v1i3.81
Hastuti, C. S. F., Arfan, M., & Diantimala, Y. (2018). The influence of free cash flow and operating cash flow on earnings management at manufacturing firms listed in the Indonesian Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 8(9), 1133-1146. http://dx.doi.org/10.6007/IJARBSS/v8-i9/4686
Kalbuana, N., Prasetyo, B., Asih, P., Arnas, Y., Simbolon, S. L., Abdusshomad, A., ... & Mahdi, F. M. (2021). Earnings management is affected by firm size, leverage and roa: evidence from Indonesia. Academy of Strategic Management Journal, 20, 1-12. https://www.proquest.com/scholarly-journals/earnings-management-is-affected-firm-size/docview/2541935909/se-2?accountid=46437
Kodriyah, K., & Fitri, A. (2017). Pengaruh free cash flow dan leverage terhadap manajemen laba pada perusahaan manufaktur di BEI. JAK (Jurnal Akuntansi) Kajian Ilmiah Akuntansi, 4(1), 64-76. https://doi.org/10.30656/jak.v4i1.218
Kontan (May 17, 2017). Harga saham BBRI turun 3,13% sehari (18/5), ini PER dan PBV-nya. Retrieved from https://investasi.kontan.co.id/news/harga-saham-bbri-turun-313-sehari-185-ini-per-dan-pbv-nya
Lestari, S. P., & Khafid, M. (2021). The role of company size in moderating the effect of profitability, profit growth, leverage, and liquidity on earnings quality. Accounting Analysis Journal, 10(2), 86-93. https://doi.org/10.15294/aaj.v10i2.45939
Lupita, I. W., & Meiranto, W. (2019). Pengaruh surplus arus kas bebas, ukuran perusahaan, leverage, dan kualitas audit terhadap manajemen laba. Diponegoro Journal of Accounting, 7(4), 1-11.
Mwangi, J. G., & Nasieku, T. (2022). Effect of ownership structure on earnings management in listed manufacturing firms at Nairobi Securities Exchange, Kenya. Asian Themes in Social Sciences Research, 6(1), 12-24. https://doi.org/10.33094/atssr.v6i1.66
Nekhili, M., Amar, I. F. B., Chtioui, T., & Lakhal, F. (2016). Free cash flow and earnings management: The moderating role of governance and ownership. The Journal of Applied Business Research, 32(1), 255-268. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2546877
Padmini, L. S., & Ratnadi, N. M. D. (2020). The effect of free cash flow, dividend policy, and financial leverage on earnings management. American Journal of Humanities and Social Sciences Research, 4(1), 195-201.
Ruwanti, G., Chandrarin, G., & Assih, P. (2019). The influence of corporate governance in the relationship of firm size and leverage on earnings management. International Journal of Innovative Science and Research Technology, 4(8), 142-147.
Salehi, A., Mohammadi, S., & Afshari, M. (2017). Impact of institutional ownership and board independence on the relationship between excess free cash flow and earnings management. Advances in Mathematical Finance and Applications, 2(3), 91-105. https://doi.org/10.5829/idosi.wasj.2012.20.03.2372
Sari, M. R., Djohanputro, B., & Kountur, R. (2021). Past performance and earnings management: The effect of free cash flow. The Journal of Asian Finance, Economics and Business, 8(1), 37-43. https://doi.org/10.13106/jafeb.2021.vol8.no1.037
Setiawati, E., Mujiyanti & Rosit, E. (2019), Pengaruh Free Cash Flow dan Leverage Terhadap Revenue Management Dengan Good Corporate Governance Sebagai Variabel Pemoderasi, Dijelaskan:Jurnal Penelitian dan Pengembangan Akuntansi, 13 (1)
Shafer, W. E. (2015). Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126, 43-60. https://doi.org/10.1007/s10551-013-1989-3
Surjandari, D. A., Minanari, M., & Nurlaelawati, L. (2021). Good corporate governance, leverage, firm size and earning management: Evidence from Indonesia. International Journal of Commerce and Finance, 7(2), 165-183.
Susanto, Y. K., & Pradipta, A. (2016). Corporate governance and real earnings management. International Journal of Business, Economics and Law, 9(1), 17-23.
Swastika, D. L. T. (2013). Corporate governance, firm size, and earning management: Evidence in Indonesia stock exchange. IOSR Journal of Business and Management, 10(4), 77-82.
Utomo, D., & Pamungkas, I. D. (2018). Cash flow activities and stock returns in manufacturing of indonesia: a moderating role of earning management. Academy of Accounting and Financial Studies Journal, 22(6), 1-10.
Wijaya, N., Pirzada, K., & Fanady, C. (2020). Determinants of earnings management: An empirical analysis. Journal of Security & Sustainability Issues, 9(4), 1265-1273. http://doi.org/10.9770/jssi.2020.9.4(13
Wimelda, L., & Chandra, A. (2018). Opportunistic behavior, external monitoring mechanisms, corporate governance, and earnings management. Accounting and Finance Review, 3(1), 44-52.
Yannizar, Y., Wazirman, W., & Septiana, G. (2020). Analysis of good corporate governance, free cash flow, leverage towards earning management, and shareholder wealth in service sector companies listed on the Indonesia Stock Exchange. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 3(3), 2567-2567v. https://doi.org/10.33258/birci.v3i3.2520
Yasa, G. S. W., Wirakusuma, M. G., & Suaryana, I. G. N. A. (2020). Effect of leverage, free cash flow, corporate governance, growth and risk management on earnings quality. International Research Journal of Management, IT and Social Sciences, 7(1), 177-184.