Does Sustainability Reporting Leads to Decrease in Real Earnings Management: Evidence from Indonesia

Authors

  • Polamorn Tamprateep
  • Vallop Supthpun
  • Thanatpong Srirueangsombat

Abstract

The evaluation of the impact ofsustainability reportingon real earnings management (RM) is the purpose of this study.  The sample of 250 public listed firms on the Indonesian stock exchange (ISE)was used to test the hypotheses over a period of 5 years covering 2014-2018.The study is based on panel data, consisting of 1250 observations and used a fixed-effect (FE) model of regression to perform multivariate regression analysis. The results show that sustainability reporting has a significant and negative influence om REM for the firms quoted on ICM. The findings infer that the firms which are providing sustainability reports regularly are less involved in REM. The managers in these firms are using sustainability reporting as a device to communicate about the sustainability of firm in future and more transparent economic performance. Moreover, the negative association also shows that there is less agency conflict among owner and managers. Apart from theoretical contributions, this study offers implications forpolicy-makers to improve SR practices to improve accounting quality by reducing REM practices by the Indonesian quoted firms.

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Published

2020-04-11

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Section

Articles