Motive Behind Earnings Management Practices in Public Property and Real Estate Companies

Abstract

This study examined the antecedents and consequence variables of earnings management. This study explained the motive of earnings management practices by public property and real estate companies in Indonesia: opportunistic or efficient. Based on developing the hypotheses, the theory was an agency, positive accounting, and signaling theories. This study was explanatory research, which aims to explain the causal relationship between variables through hypothesis testing. This research's data were financial statements of public companies in Indonesia's property and real estate sector (2014-2018) with some criteria. There are 60 firm-years data used in the analysis. Hypothesis testing uses multiple linear regression two-stage. The first stage of testing examined the influence of earnings management factors, followed by the second stage of testing to reviewed the consequences of earnings management practices. The results showed debt and independent commissioners affect earnings management. Management performs more dominant earnings management because of opportunistic interests than maintaining market value and its shareholders' interests. The implication of this research was to provide a comprehensive discourse on the motives for earnings management behavior in Indonesia.