Leverage, tax planning, and financial performance drive earnings management: A moderating role of good corporate governance

Abstract

This research investigates the relationship between leverage, tax planning, and financial performance in relation to earnings management, focusing specifically on the moderating effect of good corporate governance, represented by the audit committee. Using a quantitative approach and analyzing a sample of 80 state-owned enterprises (SOEs), the study applies regression analysis to evaluate the proposed relationships. The results indicate that leverage and tax planning significantly and positively affect earnings management. Furthermore, the audit committee variable serves as a moderator only in the relationship between tax planning and financial performance with earnings management. The findings highlight that robust corporate governance, particularly through effective audit committee oversight, can help reduce the impact of tax planning on earnings management.