Entrenchment and Alignment Effect on Earnings Management  

Oleh:

Sanjaya, I Putu Sugiartha

Jenis: Article from Journal - ilmiah internasional - terdaftar di DIKTI
Dalam koleksi: The Indonesian Journal of Accounting Research (Jurnal Riset Akuntansi Indonesia) vol. 13 no. 3 (Sep. 2010), page 247-264.
Topik: Entrenchment; Alignment; Control Rights; Cash Flow Rights; and Earnings Management.

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: RR17.9 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

The objective of this research is to investigate whether controlling shareholders manages earnings. A weak protection for non-controlling shareholders (Johnson et al., 2000a) coupled with con-concentrated ownership for majority of public companies in Indonesia, provides incentive to the controlling shareholders to manage earnings. In particular, this study investigates whether controlling shareholders entrench by managing earnings upwards as their control rights becomes greater than their cash flow right and aligns by managing earnings downwards as their cash flow rights approaches to their connected from companies listed in Indonesia stock exchange (IDX) from 2001 to 2007. I find, for 786 firm year observations, that irms controlled by ultimate shareholders with greater control rights are associated with-higher level of discretionary accruals. Consistent with entrenchment hypothesis, the result suggest that ultimate shareholders use their greater control rights to influence controlled firms to manage earnings. On the other hand, I also find that consistent with entrenchment hypothesis, as cash flow rights of the ultimate shareholders increases, the level of discretionary accruals of the controlled firms tends to decrease.

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