THE EFFECT OF OWNERSHIP STRUCTURE ON EARNINGS MANAGEMENT : MODERATION AND MEDIATION MODELS
Keywords:
Ownership Structure, Earnings Management, Financial Performance, Board Diversity
Abstract
This study examines the influence of ownership structures on earnings management practices among manufacturing firms listed on the Indonesia Stock Exchange (IDX) during 2021–2024. It further investigates whether board composition heterogeneity moderates this relationship and whether firm performance mediates it. A quantitative design was employed, utilizing audited financial statements and annual corporate reports as secondary data. From purposive sampling, 100 firm-level observations were analysed using Partial Least Squares–Structural Equation Modelling (PLS-SEM) with SmartPLS. The findings indicate that concentrated ownership, managerial shareholding, foreign equity participation, and institutional investment do not significantly affect earnings management behaviour. Likewise, diversity in board membership does not alter the ownership–earnings management nexus. In contrast, firm performance shows a significant positive association with earnings management, though it does not operate as a mediating mechanism. Interpreted through agency theory, the results suggest that prevailing ownership configurations and board oversight remain insufficient to mitigate opportunistic managerial conduct, particularly under performance pressures. These insights contribute to ongoing debates on corporate governance and reporting credibility, offering implications for investors, regulators, and decision-makers. However, the conclusions are constrained by the study’s sectoral focus and limited temporal scope, which restricts broader generalization.
References
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Lee, S. (2011). Corporate governance, firm value and managerial incentives: A comparative study of Korea and Japan. Asian Business & Management, 10(2), 231–249. https://doi.org/10.1057/abm.2010.33
Muslichah, M., Kadir Usry, A., & Arniati, T. (2022). Moderated Mediation Model of The Effect of Managerial Ownership on Financial Performance. International Journal of Commerce and Finance, 8(2), 57–74.
Neupane, S. (2024). Internal governance mechanisms and firm performance: Evidence from emerging markets. Journal of Corporate Finance, 82, 102485. https://doi.org/10.1016/j.jcorpfin.2024.102485
Nguyen, Huu, Le, Q. L., & Vu, T. K. A. (2021). Ownership structure and earnings management: Empirical evidence from Vietnam. Cogent Business & Management, 8(1), 1908006. https://doi.org/10.1080/23311975.2021.1908006
Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74–95. https://doi.org/10.1177/0974686217701467
Paolo S., & Abul K. A. (2018). Bank- and country-based determinants of banks’ performance in Asia. Journal of the Asia Pacific Economy, 23(3), 428–446.
Piosik, A., & Genge, E. (2020). The influence of a company’s ownership structure on upward real earnings management”, Sustainability,. 12(1), 152.
Purnama, H., & Utama, S. (2018). Type of Earnings Management and the Effect of Ownership Structure, Firm Size, and Corporate-Governance Practices: Evidence from Indonesia. Asian Journal of Business and Accounting, 11(1), 1–28.
Rizani, F., Syam, A. Y., & Lisandri, L. (2022). The Mediating Effect of Earnings Management on Financial Performance: The Importance of Good Corporate Governance. Australasian Accounting, Business and Finance Journal, 16(4), 14–28. https://doi.org/10.14453/aabfj.v16i4.3
Roy, T., & Alfan, E. (2022). Does Gender Diversity Moderate the Nexus Between Board Characteristics and Earnings Management? Asian Journal of Business and Accounting, 15(2), 31–77. https://doi.org/10.22452/ajba.vol15no2.2
Saona, P. ., Muro, L., & Alvarado, M. (2020). How do the ownership structure and board of directors’ features impact earnings management? The Spanish case. Journal of International Financial Management and Accounting, 31(1), 98–133.
Scott, W. R. (2015). Financial Accounting Theory 7th ed.
Tran, M. D., & Dang, N. H. (2021). The Impact of Ownership Structure on Earnings Management: The Case of Vietnam. SAGE Open, 11(3). https://doi.org/10.1177/21582440211047248
Wardani, D. K., & Kusuma, I. W. (2012). Is Earnings Management Informational or Opportunistic? Evidence from ASEAN Countries. Gadjah Mada International Journal of Business, 14(1), 61–75. https://doi.org/10.22146/gamaijb.5497
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Akter, Aklima, Wan Yusoff, W. F., & Abdul-Hamid, M. A. (2024). The moderating role of board diversity on the relationship between ownership structure and real earnings management. Asian Journal of Accounting Research, 9(2), 98–115. https://doi.org/10.1108/AJAR-10-2022-0307
Akter, T., Rahman, M. M., & Sultana, N. (2024). Earnings Management and Investor Perception: Evidence from Emerging Markets. International Journal of Accounting and Finance Studies, 12(1), 45–62. https://doi.org/10.1016/j.ijafs.2024.01.004
AL-Duais, S. D. ., Malek, M. ., Abdul Hamid, M. A., & Almasawa, A. M. (2022). Ownership structure and real earnings management: evidence from an emerging market. Journal of Accounting in Emerging Economies, 12(1), 380–404.
Alves, S. (2012). Ownership structure and earnings management: Evidence from Portugal. Australasian Accounting Business and Finance Journal, 6(1), 57–74. https://doi.org/10.14453/aabfj.v6i1.5
Choi, J. (2019). Ownership structure, internal control, and firm performance: Evidence from Asia-Pacific firms. Asia Pacific Management Review, 24(3), 263–275. https://doi.org/10.1016/j.apmrv.2018.08.002
Chowdhury, D. (2004). Incentives, Control and Development: Governance in Private and Public Sector with Special Reference to Bangladesh. Viswavidyalay Prakashana Samstha.
Core, E. ., Holthausen, R. . &, & Larcker, D. (1999). Corporate governance, chief executive compensation, and firm performance. Journal of Financial Economics, 51(3), 371–406.
Dang Ngoc, H., & Tran Manh, D. (2020). The impact of ownership structure, financial distress on earnings management: the case of Vietnam. Advance.
Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review, 70(2), 193–225.
Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.
Fama, E. F., & French, K. R. (1998). Value versus growth: The international evidence. The Journal of Finance, 53(6), 1975–1999. https://doi.org/10.1111/0022-1082.00080
Gajdosikova, D., Valaskova, K., & Durana, P. (2022). Earnings Management and Corporate Performance in the Scope of Firm-Specific Features. Journal of Risk and Financial Management, 15(10). https://doi.org/10.3390/jrfm15100426
Geraldina, I., Rossieta, H., & Utama, S. (2015). Motives of Customer Deposits Window-Dressing in Indonesian Commercial Banks.
Ghaleb, B. A. A., Qaderi, S. A., Almashaqbeh, A., & Qasem, A. (2021). Corporate social responsibility, board gender diversity and real earnings management: The case of Jordan. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1883222
Haliza, S. N., & Suwarno, S. (2022). Pengaruh Tata Kelola Perusahaan Terhadap Manajemen Laba. Journal of Culture Accounting and Auditing, 1(1), 120. https://doi.org/10.30587/jcaa.v1i1.4240
Handayani, B. D., Rohman, A., Chariri, A., & Pamungkas, I. D. (2020). Corporate financial performance on corporate governance mechanism and corporate value: Evidence from Indonesia. Montenegrin Journal of Economics, 16(3), 161–171. https://doi.org/10.14254/1800-5845/2020.16-3.13
Hashim, H., & Devi, S. (2008). Board independence, CEO duality and accrual management: Malaysian evidence. Asian Journal of Business and Accounting, 1(1), 27–46.
Jelinek, K. (2007). The effect of leverage increases on earnings management. Journal of Business and Economic Studies, 13(2), 24–46.
Jensen, M. C., & W. H. Meckling. (1976). Teori Perusahaan: Perilaku Manajerial, Biaya Keagenan dan Struktur Kepemilikan. 3, 305–360.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228. https://doi.org/10.2307/2491047
Kim, J.-B., & Sohn, B. C. (2013). Real Earnings Management and Cost of Capital. Journal of Accounting and Public Policy, 32(6), 518–543. https://doi.org/10.1016/j.jaccpubpol.2013.08.002
Kirimi, P. N., Kariuki, S. N., & Ocharo, K. N. (2022). Ownership structure and financial performance: Evidence from Kenyan commercial banks. PLoS ONE, 17(5 May), 1–20. https://doi.org/10.1371/journal.pone.0268301
Le, Q. L., & Nguyen, H. A. (2023). The impact of board characteristics and ownership structure on earnings management: Evidence from a frontier market. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2022.2159748
Lee, S. (2011). Corporate governance, firm value and managerial incentives: A comparative study of Korea and Japan. Asian Business & Management, 10(2), 231–249. https://doi.org/10.1057/abm.2010.33
Muslichah, M., Kadir Usry, A., & Arniati, T. (2022). Moderated Mediation Model of The Effect of Managerial Ownership on Financial Performance. International Journal of Commerce and Finance, 8(2), 57–74.
Neupane, S. (2024). Internal governance mechanisms and firm performance: Evidence from emerging markets. Journal of Corporate Finance, 82, 102485. https://doi.org/10.1016/j.jcorpfin.2024.102485
Nguyen, Huu, Le, Q. L., & Vu, T. K. A. (2021). Ownership structure and earnings management: Empirical evidence from Vietnam. Cogent Business & Management, 8(1), 1908006. https://doi.org/10.1080/23311975.2021.1908006
Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian Journal of Corporate Governance, 10(1), 74–95. https://doi.org/10.1177/0974686217701467
Paolo S., & Abul K. A. (2018). Bank- and country-based determinants of banks’ performance in Asia. Journal of the Asia Pacific Economy, 23(3), 428–446.
Piosik, A., & Genge, E. (2020). The influence of a company’s ownership structure on upward real earnings management”, Sustainability,. 12(1), 152.
Purnama, H., & Utama, S. (2018). Type of Earnings Management and the Effect of Ownership Structure, Firm Size, and Corporate-Governance Practices: Evidence from Indonesia. Asian Journal of Business and Accounting, 11(1), 1–28.
Rizani, F., Syam, A. Y., & Lisandri, L. (2022). The Mediating Effect of Earnings Management on Financial Performance: The Importance of Good Corporate Governance. Australasian Accounting, Business and Finance Journal, 16(4), 14–28. https://doi.org/10.14453/aabfj.v16i4.3
Roy, T., & Alfan, E. (2022). Does Gender Diversity Moderate the Nexus Between Board Characteristics and Earnings Management? Asian Journal of Business and Accounting, 15(2), 31–77. https://doi.org/10.22452/ajba.vol15no2.2
Saona, P. ., Muro, L., & Alvarado, M. (2020). How do the ownership structure and board of directors’ features impact earnings management? The Spanish case. Journal of International Financial Management and Accounting, 31(1), 98–133.
Scott, W. R. (2015). Financial Accounting Theory 7th ed.
Tran, M. D., & Dang, N. H. (2021). The Impact of Ownership Structure on Earnings Management: The Case of Vietnam. SAGE Open, 11(3). https://doi.org/10.1177/21582440211047248
Wardani, D. K., & Kusuma, I. W. (2012). Is Earnings Management Informational or Opportunistic? Evidence from ASEAN Countries. Gadjah Mada International Journal of Business, 14(1), 61–75. https://doi.org/10.22146/gamaijb.5497
Zulkarnaen, W., Fitriani, I., & Yuningsih, N. (2020). Pengembangan Supply Chain Management Dalam Pengelolaan Distribusi Logistik Pemilu Yang Lebih Tepat Jenis, Tepat Jumlah Dan Tepat Waktu Berbasis Human Resources Competency Development Di KPU Jawa Barat. Jurnal Ilmiah MEA (Manajemen, Ekonomi, & Akuntansi), 4(2), 222-243. https://doi.org/10.31955/mea.vol4.iss2.pp222-243.
Published
2026-01-31
How to Cite
Afifah, N., & Suwarno, S. (2026). THE EFFECT OF OWNERSHIP STRUCTURE ON EARNINGS MANAGEMENT : MODERATION AND MEDIATION MODELS. Jurnal Ilmiah Manajemen, Ekonomi, & Akuntansi (MEA), 10(1), 501-518. https://doi.org/10.31955/mea.v10i1.7299
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