MARKET REACTION TO EARNINGS MANAGEMENT AND THE ROLE OF AUDIT QUALITY: EVIDENCE FROM INDONESIA

Ratnaningrum Ratnaningrum; Indrian Supheni; Risma Nurhapsari

doi:10.54209/ekonomi.v12i02.1615

Authors

Ratnaningrum Ratnaningrum STIE Studi Ekonomi Modern
Indrian Supheni STIE Nganjuk
Risma Nurhapsari STIE Studi Ekonomi Modern

DOI:

https://doi.org/10.54209/ekonomi.v12i02.1615

Keywords:

Earnings management, Discretionary accruals, Market reaction, Audit Quality

Abstract

This study aims to determine whether the earnings management influences market reaction and whether audit quality moderates the relationship between earnings management and market reactions. The research sample has 115 manufacturing companies that go public in Indonesia Stock Exchange listed in 2013 – 2015 so that the number of samples (n) = 345 observations. Discretionary accruals are used to gauge the earnings management.. This study uses boostrap test to examine the hypothesis. The result shows that earnings management affects the market reaction positively. So it indicates if the market still gives a positive reaction to the report that generates earnings even though it contains earnings management. The interaction between book value equity and audit quality has a significant positive effect on the relationship between earnings management and market reaction.

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Author Biographies

Indrian Supheni, STIE Nganjuk

Risma Nurhapsari, STIE Studi Ekonomi Modern

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