THE EFFECT OF SHORT-TERM DEBT ON ACCRUAL BASED EARNINGS MANAGEMENT AND REAL EARNINGS MANAGEMENT: EVIDENCE FROM INDONESIAN MANUFACTURING COMPANIES

Saragih, Cinthya Gladys Putri (2019) THE EFFECT OF SHORT-TERM DEBT ON ACCRUAL BASED EARNINGS MANAGEMENT AND REAL EARNINGS MANAGEMENT: EVIDENCE FROM INDONESIAN MANUFACTURING COMPANIES. S1 thesis, UAJY.

Text EAI19853.pdf Restricted to Repository staff only Download (5MB)

Abstract

According to Watt and Zimmerman (1986) in Scott (2012), debt covenant hypothesis stated that the closer business entity to the breach of debt agreement, the greater the manager will make earnings management. Contract violations that occur can cause high costs and can damage the reputation of the business entity. It was also supported by Sweeney's (1994) where the business entities that approached default tend to do earnings management to avoid breach of contract. High short-term debt also has an impact to increase the liquidity risk, which implies that the credit rating of the business entity is reduced, it cause the business entity needs faster cash flow to repay the debt, as Johnson (2003) said in Fung and Goodwin (2013). The study is conducted with a specific purpose, the purpose of this study is to provide empirical evidence of the effect of the short-term debt on the earnings management. This study is conducted on manufacturing companies listed on the Indonesia Stock Exchange 2012 – 2016. The result of research shows that short-term debt has no effect on accrual earnings management but it has a positive effect on real earnings management.

Actions (login required)

View Item