The Effect of Company Size, Debt Level, and Ownership Level on Earnings Management Before and After Changes in 2000 Corporate Income Tax Rates
Amount: The Effect of Company Size, Debt Level, and Ownership Level on Earnings Management Before and After Changes in 2000 Corporate Income Tax Rates
Authors: Siswo Pranoto
Memberships: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya
Publisher: Airlangga University
Abstract
Often in reporting a financial statement the company's management tends to manipulate it to maximize the interests of each party. The condition of the absence of sufficient information is realized by the manager so that it will encourage inappropriate behavior by practicing earnings management.
This study seeks to examine and obtain empirical evidence whether the factors of changes in corporate income rates in Law no. 17 of 2000 concerning Income Tax, which results in a decrease in the amount of tax payable which will have an impact on the company's earnings management behavior. This study also examines and seeks to obtain empirical evidence whether earnings management behavior carried out by company management will be influenced by company size, debt level and ownership level.
The results of the study using multiple regression and different tests for the first hypothesis prove that the factor of changes in corporate income tax rates has an impact on the company's earnings management behavior. This is indicated by the value of the earnings management test results which prove that the value of discretionary accruals after the change in the corporate income tax rate is higher than the value of the discretionary accrual before the change in the corporate income tax rate. This means that the management of the company tends to postpone its income in 2000, where the corporate income tax rate is still high, and then recognize it as income in 2001, where the corporate income tax rate is lower, so that the company can get tax savings.
This study also finds evidence that earnings management measures can be influenced by firm size and firm debt levels, while firm ownership has no significant effect on earnings management measures.
Company size has a negative and significant effect on earnings management, this means that the larger the size of the company, the company tends not to carry out earnings management by shifting its income from 2000 to 2001 to obtain corporate income tax savings. This happens because for large companies the reduction in corporate income tax rates is not significant enough to encourage them to shift their income from the 2000 to 2001 fiscal year in order to obtain a reduction in corporate income tax, there are many other interests that are more valuable than obtaining corporate income tax savings.
The level of debt has a positive and significant effect on earnings management, this means that companies with high levels of debt tend to increase their profits because in addition to minimizing losses arising from violations of credit agreements, it is also due to provide a good appearance of the company's performance in the eyes of creditors. and investors, so despite the level of debt. high corporate profits remain high.
The level of management ownership does not have a significant, significant effect on earnings management. This indicates that the practice of earnings management is not supported by the variable level of management ownership, this occurs because ownership
Keywords: Earning Management, Firm Size, Debt Level, Manager Ownership, Corporate Income tax rate.
sources: http://repository.unair.ac.id/34436/
