Title: The Influence of Political Connections on Executive Compensation Through Earnings Management

Authors: Dianty Sonia Puruhita

Affiliations : Masters Program in Accounting, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia

Publisher: Universitas Airlangga

Abstract

This study aims to empirically demonstrate the effect of political connections on executive compensation through earnings management. This study used a sample of companies from all sectors except financial sector companies listed on the Indonesia Stock Exchange for the 2016-2018 period. The total sample size in this study was 1,145 observations. The analysis technique used in this study was the partial least squares (PLS) model with WarpPLS 6.0 statistical software. Political connections were measured using ratios, executive compensation was measured by the natural logarithm of total compensation received by the board, while earnings management was measured using the absolute value of discretionary accruals. The results of the study indicate that political connections directly have a significant positive effect on executive compensation. The results also indicate that earnings management is able to mediate the effect of political connections on executive compensation.

Keywords: Political Connections, Executive Compensation, Earnings Management

Sources: http://repository.unair.ac.id/94545/