Title: The Moderating Role of Family Ownership in the Influence of Corporate Governance on Corporate 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-owned businesses in the entire corporate sector. Family ownership is an indicator of whether a company is considered a family business. Companies are conceptually run based on agency theory, whereby there are capital owners and managers bound by a contract. However, with substantial family ownership, it becomes 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 earnings management in financial reports. These earnings management efforts can be minimized through corporate governance practices. This study attempts to examine whether family ownership moderates the effect of corporate governance practices on earnings management. The companies used in this study totaled 70 companies, each per year from 2015 to 2017, with a total of 210 data on the Indonesia Stock Exchange (IDX). The estimation model used was a panel data regression model. Three development models were used to test the hypotheses used in this study, with the following results. The first model showed that corporate governance practices, in the form of the proportion of independent board members, negatively affected earnings management in manufacturing companies listed on the IDX from 2015 to 2017. The second model proves that family ownership has a positive effect on earnings management in manufacturing companies listed on the IDX in 2015-2017. The third model shows that family ownership moderates corporate governance practices as a proxy for audit quality in relation to earnings management in manufacturing companies listed on the IDX in 2015-2017.

Keywords: Family Business, Corporate Governance, Profit Management

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