Title: The Moderating Role of Family Ownership on the Influence of Corporate Governance on Company Profit Management in Indonesia

Authors: Have Zulkarnaen

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

Publisher: Universitas Airlangga

Abstract

Indonesia is said to have approximately 95% of family companies from the entire existing corporate sector. Family ownership is an indicator of being said to be a family company. In its concept, companies are run based on agency theory where there is a capital owner and a management party who are bound by a contract, however, with large family ownership, it will be difficult to separate family interests from company interests. Another problem that occurs is that controlling shares with minority shareholders can create a conflict of interest, one of which is regarding earnings management in financial reports. These earnings management efforts can be minimized with corporate governance practices. This research tries to test whether family ownership moderates the influence of corporate governance practices on earnings management. The companies used in this research were 70 companies each year from 2015 to 2017 with 210 data on the IDX. The estimation model used is a panel data regression model. There are 3 development models to test the hypotheses used in this research with the following results. The first model is that corporate governance practices in the form of the proportion of independent boards have a negative effect on earnings management of manufacturing companies listed on the IDX in 2015-2017. The second model proves that family ownership has a positive effect on profit management of manufacturing companies listed on the IDX in 2015-2017. The third model of family ownership moderates corporate governance practices as a proxy for audit quality on earnings management of manufacturing companies listed on the IDX in 2015-2017.

Keywords: Family Company, Corporate Governance, Profit Management

Sources: http://repository.unair.ac.id/94548/