ojs2 has produced an error Message: WARNING: Invalid argument supplied for foreach() In file: /home/jab1/public_html/lib/pkp/classes/core/Core.inc.php At line: 149 Stacktrace: File: /home/jab1/public_html/lib/pkp/classes/core/Core.inc.php line 149 Function: PKPApplication->errorHandler(2, "Invalid argument supplied for foreach()", "/home/jab1/public_html/lib/pkp/classes/core/Core.inc.php", 149, Array(6)) File: /home/jab1/public_html/lib/pkp/classes/core/PKPRequest.inc.php line 463 Function: Core->isUserAgentBot("Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)") File: /home/jab1/public_html/plugins/generic/usageEvent/UsageEventPlugin.inc.php line 353 Function: PKPRequest->isBot() File: /home/jab1/public_html/plugins/generic/usageEvent/UsageEventPlugin.inc.php line 106 Function: UsageEventPlugin->_buildUsageEvent("TemplateManager::display", Array(5)) File: (unknown) line (unknown) Function: UsageEventPlugin->getUsageEvent("TemplateManager::display", Array(5)) File: /home/jab1/public_html/lib/pkp/classes/plugins/HookRegistry.inc.php line 89 Function: call_user_func(Array(2), "TemplateManager::display", Array(5)) File: /home/jab1/public_html/lib/pkp/classes/template/PKPTemplateManager.inc.php line 332 Function: HookRegistry->call("TemplateManager::display", Array(5)) File: /home/jab1/public_html/pages/article/ArticleHandler.inc.php line 224 Function: PKPTemplateManager->display("article/article.tpl") File: (unknown) line (unknown) Function: ArticleHandler->view(Array(1), Object(Request)) File: /home/jab1/public_html/lib/pkp/classes/core/PKPRouter.inc.php line 362 Function: call_user_func(Array(2), Array(1), Object(Request)) File: /home/jab1/public_html/lib/pkp/classes/core/PKPPageRouter.inc.php line 220 Function: PKPRouter->_authorizeInitializeAndCallRequest(Array(2), Object(Request), Array(1), False) File: /home/jab1/public_html/lib/pkp/classes/core/Dispatcher.inc.php line 134 Function: PKPPageRouter->route(Object(Request)) File: /home/jab1/public_html/lib/pkp/classes/core/PKPApplication.inc.php line 178 Function: Dispatcher->dispatch(Object(Request)) File: /home/jab1/public_html/index.php line 64 Function: PKPApplication->execute() Server info: OS: Linux PHP Version: 5.6.40-38+ubuntu18.04.1+deb.sury.org+1 Apache Version: N/A DB Driver: mysql DB server version: 5.7.33-0ubuntu0.16.04.1-log
Institutional Ownership, Family Firms, Leverage, and Earnings Management | Kuncara Widagdo | Jurnal Akuntansi dan Bisnis

Institutional Ownership, Family Firms, Leverage, and Earnings Management

Ari Kuncara Widagdo, Rahmawati Rahmawati, Djuminah Djuminah, Ratnaningrum Ratnaningrum

##article.abstract##


This study aims to record the empirical finding on the influence of family firms and institutional ownership on earnings management. It also examines the effect of leverage on the correlation between family firms and institutional ownership to earnings management. The object of the study comprises manufacturing firms registered in the Indonesia Stock Exchange from 2017 through 2020. The observations are 44 firm years in total. The data were collected from their annual financial reports, using panel regression as the analysis method. The findings suggest that family firms negatively influence earnings management, whereas institutional ownership has no impact on earnings management. This implies that the family firms ownership tends to generate an alignment effect. Furthermore, leverage negatively influences earnings management, but it has a positive impact on the relationship between family firms with earnings management, likewise has no consequence to the relationship institutional effect with earnings management. It indicates that family firms with high leverage intend to minimize the chance of violation against debt covenants and, at the same time, intensify the firm's negotiation power over debt negotiation.

Studi ini bertujuan untuk menguji secara empiris pengaruh perusahaan keluarga dan kepemilikan institusional terhadap manajemen laba. Kami juga menguji apakah leverage memiliki pengaruh pada hubungan antara perusahaan keluarga dan kepemilikan institusional terhadap manajemen laba. Kami secara khusus memeriksa perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia selama 2017-2020. Total observasi adalah 44 perusahaan-tahun. Data penelitian dikumpulkan dari laporan keuangan tahunan. Analisis data menggunakan regresi data panel. Bukti menunjukkan bahwa perusahaan keluarga berpengaruh negatif terhadap manajemen laba, sedangkan kepemilikan institusional tidak berpengaruh terhadap manajemen laba. Hal ini menunjukkan bahwa kepemilikan perusahaan keluarga cenderung menghasilkan efek keselarasan. Selanjutnya, leverage berpengaruh negatif terhadap manajemen laba, tetapi berpengaruh positif terhadap hubungan antara perusahaan keluarga dengan manajemen laba, tetapi tidak berpengaruh terhadap hubungan institusional dengan manajemen laba. Hal ini menunjukkan bahwa perusahaan keluarga dengan leverage yang tinggi ingin mengurangi kemungkinan pelanggaran perjanjian utang dan meningkatkan kekuatan negosiasi perusahaan selama negosiasi utang.

##article.subject##


institutional ownership;family firms;leverage;earnings management

Full Text:

PDF

References


Afza, T., & Rashid, B. (2014). Opportunistic earnings management, debt and diversification: empirical evidence for manufacturing firms of Pakistan. Science International, 26(5), 2489–2494.

Ajay, R., & Madhumathi, R. (2015). Institutional ownership and earnings management in India. Indian Journal of Corporate Governance, 8(2), 119–136.

Al-Jaifi, H. A. (2017). Ownership concentration, earnings management and stock market liquidity: evidence from Malaysia. Corporate Governance: The International Journal of Business in Society.

Alhebri, A. A., & Al-Duais, S. D. (2020). Family businesses restrict accrual and real earnings management: Case study in Saudi Arabia.

Alzoubi, E. S. S. (2016). Ownership structure and earnings management: evidence from Jordan. International Journal of Accounting & Information Management.

Anderson, R. C., & Reeb, D. M. (2003). Founding‐family ownership and firm performance: evidence from the S&P 500. The Journal of Finance, 58(3), 1301–1328.

Arifin, Z. (2003). Agency problems and control mechanism in the concentrated ownership structure company being controlled family. Doctoral dissertation, University of Indonesia, Depok.

Asim, A., & Ismail, A. (2019). Impact of leverage on earning management: Empirical evidence from the manufacturing sector of Pakistan. Journal of Finance and Accounting Research, 1(1), 70–91.

Berenson, M., Levine, D., & Watson, J. (2012). Business statistics. Pearson Australia Pty Limited.

Borralho, J. M., Vázquez, D. G., & Hernández-Linares, R. (2020). Earnings management in private family versus non-family firms. The moderating effect of family business generation. Spanish Journal of Finance and Accounting/Revista Española de Financiación y Contabilidad, 49(2), 210–233.

Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239–253.

Bricker, R., & Markarian, G. (2015). Institutional investors and insider trading profitability. European Accounting Review, 24(3), 495–518.

Brickley, J. A., Lease, R. C., & Smith Jr, C. W. (1988). Ownership structure and voting on antitakeover amendments. Journal of Financial Economics, 20, 267–291.

Bushee, B. J. (2001). Do Institutional Investors Prefer Near-Term Earnings over Long-Run Value ?*. 18(2), 207–246.

Carney, M., & Gedajlovic, E. (2002). The co-evolution of institutional environments and organizational strategies: The rise of family business groups in the ASEAN region. Organization Studies, 23(1), 1–29.

Cascino, S., Pugliese, A., Mussolino, D., & Sansone, C. (2010). The Influence of family ownership on the quality of accounting information. Family Business Review, 23(3), 246–265.

Chamberlain, T. W., Butt, U. R., & Sarkar, S. (2014). Accruals and real earnings management around debt covenant violations. International Advances in Economic Research, 20(1), 119–121.

Chandera, Y., Utama, C. A., Husodo, Z. A., & Setia-Atmaja, L. (2018). The co-insurance effect hypothesis and the cost of bank loans: Evidence from Indonesian pyramidal business groups. Global Finance Journal, 37, 100–122.

Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61.

Chi, C. W., Hung, K., Cheng, H. W., & Lieu, P. T. (2015). Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics & Finance, 36, 88–98.

Chung, C. Y., Liu, C., Wang, K., & Zykaj, B. B. (2015). Institutional monitoring: Evidence from the F‐score. Journal of Business Finance & Accounting, 42(7–8), 885–914.

Claessens, S., Djankov, S., Fan, J. P. H., & Lang, L. H. P. (2002). Disentangling the incentive and entrenchment effects of large shareholdings. The Journal of Finance, 57(6), 2741–2771.

Claessens, S., Djankov, S., & Lang, L. H. P. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58(1–2), 81–112.

Coffee Jr, J. C. (1991). Liquidity versus control: The institutional investor as corporate monitor. Colum. L. Rev., 91, 1277.

Cornett, M. M., Marcus, A. J., Saunders, A., & Tehranian, H. (2007). The impact of institutional ownership on corporate operating performance. Journal of Banking & Finance, 31(6), 1771–1794.

Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20–47.

De Massis, A., Kotlar, J., Campopiano, G., & Cassia, L. (2015). The impact of family involvement on SMEs’ performance: Theory and evidence. Journal of Small Business Management, 53(4), 924–948.

Dichev, I. D., & Skinner, D. J. (2002). Large–sample evidence on the debt covenant hypothesis. Journal of Accounting Research, 40(4), 1091–1123.

Durana, P., Valaskova, K., Chlebikova, D., Krastev, V., & Atanasova, I. (2020). Heads and tails of earnings management: Quantitative analysis in emerging countries. Risks, 8(57), 1–20. https://doi.org/10.3390/risks8020057

Elyasiani, E., Wen, Y., & Zhang, R. (2017). Institutional ownership and earning management by bank holding companies. Journal of Financial Research, 40(2), 147–178.

Fan, J. P. H., & Wong, T. J. (2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 33, 401–425.

Ferramosca, S., & Ghio, A. (2018). Accounting choices in family firms: An analysis of influences and implications. Springer.

Ghosh, A., & Moon, D. (2010). Corporate debt financing and earnings quality. Journal of Business Finance & Accounting, 37(5‐6), 538–559.

Goel, S., Mazzola, P., Phan, P. H., Pieper, T. M., & Zachary, R. K.

(2012). Strategy, ownership, governance, and socio-psychological perspectives on family businesses from around the world. Journal of Family Business Strategy, 3(2), 54–65.

Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J. L., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.

Gottardo, P., & Moisello, A. M. (2014). The capital structure choices of family firms: evidence from Italian medium-large unlisted firms. Managerial Finance.

Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (international edition). New York: McGraw-Hills Inc.

Guthrie, K., & Sokolowsky, J. (2010). Large shareholders and the pressure to manage earnings. Journal of Corporate Finance, 16(3), 302–319.

Hadani, M., Goranova, M., & Khan, R. (2011). Institutional investors, shareholder activism, and earnings management. Journal of Business Research, 64(12), 1352–1360.

Hashmi, M. A., Brahmana, R. K., & Lau, E. (2018). Political connections, family firms and earnings quality. Management Research Review.

Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 1251–1271.

Hope, O.-K. (2013). Large shareholders and accounting research. China Journal of Accounting Research, 6(1), 3–20.

Hunjra, A. I., Perveen, U., Li, L., Chani, M. I., & Mehmood, R. (2020). Impact of ownership concentration, institutional ownership and earnings management on stock market liquidity. Corporate Ownership & Control, 17(2), 77–87.

Iatridis, G., & Kadorinis, G. (2009). Earnings management and firm financial motives: A financial investigation of UK listed firms. International Review of Financial Analysis, 18(4), 164–173. https://doi.org/10.1016/j.irfa.2009.06.001

Jalil, A. A., & Rahman, R. A. (2010). Institutional investors and earnings management: Malaysian evidence. Journal of Financial Reporting and Accounting.

Jelinek, K. (2007). The effect of leverage increases on earnings management. The Journal of Business and Economic Studies, 13(2), 24.

Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323–329.

Jensen, M. C., & Meckling, W. H. (1976a). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360. http://hupress.harvard.edu/catalog/JENTHF.html

Jensen, M. C., & Meckling, W. H. (1976b). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

Jiang, W., & Anandarajan, A. (2009). Shareholder rights, corporate governance and earnings quality: The influence of institutional investors. Managerial Auditing Journal.

Jiraporn, P., & DaDalt, P. J. (2009). Does founding family control affect earnings management? Applied Economics Letters, 16(2), 113–119.

Kałdoński, M., Jewartowski, T., & Mizerka, J. (2020). Capital market pressure, real earnings management, and institutional ownership stability-Evidence from Poland. International Review of Financial Analysis, 71, 101315.

Kim, I., Miller, S., Wan, H., & Wang, B. (2016). Drivers behind the monitoring effectiveness of global institutional investors: Evidence from earnings management. Journal of Corporate Finance, 40, 24–46.

Koh, P.-S. (2003). On the association between institutional ownership and aggressive corporate earnings management in Australia. The British Accounting Review, 35(2), 105–128.

Koh, P.-S. (2007). Institutional investor type, earnings management and benchmark beaters. Journal of Accounting and Public Policy, 26(3), 267–299.

Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39, 163–197.

Kumala, R., & Siregar, S. V. (2020). Corporate social responsibility, family ownership and earnings management: the case of Indonesia. Social Responsibility Journal.

Kvaal, E., Langli, J. C., & Abdolmohammadi, M. J. (2012). Earnings management priorities of private family firms. Available at SSRN 1532824.

La Porta, R., Lopez-de-silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. The Journal of Finance, 54(2), 471–517.

Lazzem, S., & Jilani, F. (2018). The impact of leverage on accrual-based earnings management: The case of listed French firms. Research in International Business and Finance, 44, 350–358.

Lee, S.-H., Peng, M. W., & Barney, J. B. (2007). Bankruptcy law and entrepreneurship development: A real options perspective. Academy of Management Review, 32(1), 257–272.

Lemma, T. T., Negash, M., Mlilo, M., & Lulseged, A. (2018). Institutional ownership, product market competition, and earnings management: Some evidence from international data. Journal of Business Research, 90, 151–163.

Masulis, R. W., Pham, P. K., & Zein, J. (2011). Family business groups around the world: Financing advantages, control motivations, and organizational choices. The Review of Financial Studies, 24(11), 3556–3600.

Midi, H., Sarkar, S. K., & Rana, S. (2010). Collinearity diagnostics of binary logistic regression model. Journal of Interdisciplinary Mathematics, 13(3), 253–267.

Moghaddam, A., & Abbaspour, N. (2017). The effect of leverage and liquidity ratios on earnings management and capital of banks listed on the Tehran Stock Exchange. International Review of Management and Marketing, 7(4), 99–107.

Obeidat, M. I. S. (2016). Capital Structure Effect on the Practices of Earnings Management Phenomenon? The Evidence of Listed Firms in Abu Dhabi Securities Exchange. Asian Journal of Finance & Accounting, 8(2), 171. https://doi.org/10.5296/ajfa.v8i2.10198

Paiva, I. S., Lourenço, I. C., & Branco, M. C. (2016). Earnings management in family firms: Current state of knowledge and opportunities for future research. Review of Accounting and Finance, 15(1), 85–100. https://doi.org/10.1108/RAF-06-2014-0065

Pallant, J. (2011). SPSS survival manual: A step by step guide to data analysis using IBM SPSS (4th, 36 (3 ed.). Routledge.

Panda, A. K., & Nanda, S. (2020). Determinants of capital structure; a sector-level analysis for Indian manufacturing firms. International Journal of Productivity and Performance Management.

Porter, M. E. (1992). Capital choices: Changing the way America invests in industry. Journal of Applied Corporate Finance, 5(2), 4–16.

Potharla, S., Bhattacharjee, K., & Iyer, V. (2021). Institutional ownership and earnings management: Evidence from India. Cogent Economics and Finance, 9(1). https://doi.org/10.1080/23322039.2021.1902032

Prencipe, A., & Bar-Yosef, S. (2011). Corporate governance and earnings management in family-controlled companies. Journal of Accounting, Auditing & Finance, 26(2), 199–227.

Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An International Review, 16(3), 160–177.

Qamar, M., Shahzad, A., & Masood, S. (2015). The relationship between debt financing and reported earnings quality: an empirical analysis of non-financial firms of Pakistan. Journal of Applied Environmental, 5(7), 13–19.

Setiawan, D., Taib, F., Phua, L. K., & Chee, H. K. (2020). IFRS, Family Ownership and Earnings Management in The Indonesian Banking Industry. International Journal of Economics & Management, 14(2), 233–245.

Shahzad, F., Rauf, S. A., Saeed, A., & Al Barghouthi, S. (2017). EARNING MANAGEMENT STRATEGIES OF LEVERAGED FAMILY AND NON-FAMILY CONTROLLED FIRMS: AN EMPIRICAL EVIDENCE. International Journal of Business & Society, 18.

Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3), 461–488.

Shleifer, A., & Vishny, R. W. (1997). A Survey of corporate governance. The Journal of Finance, 52(2), 737–783.

Siregar, S. V., & Utama, S. (2008). Type of earnings management and the effect of ownership structure, firm size, and corporate-governance practices: Evidence from Indonesia. The International Journal of Accounting, 43, 1–27.

Suprianto, E., Rahmawati, R., Setiawan, D., & Aryani, Y. A. (2019). Controlling generation of family firms and earnings management in Indonesia: The role of accounting experts of audit committees. Journal of International Studies, 12(3).

Sya’bani, A. (2014). Minority shareholders’ protection in the Indonesian Capital Market. Indon. L. Rev., 4, 114.

Tahir, S. H., Akram, S., Perveen, S., Ahmad, G., & Ullah, M. R. (2020). Entrenchment effect and audit quality in family business of Pakistan. The Journal of Asian Finance, Economics, and Business, 7(8), 95–102.

Tonye, O., & Sokiri, I. S. (2020). Financial leverage on earnings management of quoted manufacturing companies in Nigeria. International Journal of Management Science and Business Administration, 6(4), 7–21.

Utama, C. A., Utama, S., & Amarullah, F. (2017). Corporate governance and ownership structure: Indonesia evidence. Corporate Governance: The International Journal of Business in Society.

Villalonga, B., & Amit, R. (2006). How do family ownership, control

and management affect firm value? Journal of Financial Economics, 80(2), 385–417.

Wang, D. (2006). Founding family ownership and earnings quality. Journal of Accounting Research, 44(3), 619–656.

Wasimullah, T., & Abbas, Z. (2010). Can High Leverage Control the Opportunistic Behavior of Managers: Case Analysis of Textile Sector of Pakistan. Int. Res. J. Financ. Econ, 47, 134–142.

Wulandari, E. R., & Rahman, A. R. (2004). Political patronage, cross-holdings and corporate governance in Indonesia. In The governance of East Asian corporations (pp. 71–95). Springer.

Yang, M.-L. (2010). The impact of controlling families and family CEOs on earnings management. Family Business Review, 23(3), 266–279.

Zamri, N., Rahman, R. A., & Isa, N. S. M. (2013). The impact of leverage on real earnings management. Procedia Economics and Finance, 7, 86–95.

Zhong, L., Chourou, L., & Ni, Y. (2017). On the association between strategic institutional ownership and earnings quality: Does investor protection strength matter? Journal of Accounting and Public Policy, 36(6), 429–450.

Zhuang, J., Edwards, D., & Capulong, M. V. A. (2001). Corporate Governance & Finance in East Asia: A Study of Indonesia, Republic of Korea, Malaysia, Philippines and Thailand. Asian Development Bank.

Zraiq, M. A. A., & Fadzil, F. H. B. (2018). The impact of ownership structure on firm performance: Evidence from Jordan. International Journal of Accounting, Finance and Risk Management, 3(1), 1–4.




DOI: http://dx.doi.org/10.20961/jab.v21i2.702

Jurnal Akuntansi dan Bisnis (JAB)
ISSN 1412-0852 (print), 2580-5444 (online)
Published by Accounting Study Program, Faculty of Economics and Business, Universitas Sebelas Maret, Indonesia


Creative Commons License
JAB on http://jab.fe.uns.ac.id/index.php/jab is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License

Visitor Statistic