| Summary: | Managerial ability were positively related to earnings management (Isnugrahadi
and Kusuma, 2009). More able managers will be easier to manage earnings
management, both discretionary accruals and real earnings management
(Demerjian et al. 2012b). The level of investor protection becomes one of the
external factors that can reduce the occurrence of earnings management (Leuz et
al., 2003). The high protection afforded to investors could be expected to reduce
earnings management is carried out by able manager.
Assuming opportunistic earnings management, so that a more able manager will
be easier to manage earnings management, the assumption is proved by regression
analysis conducted on manufacturing firms in six (6) countries in Asia, namely
Indonesia, Japan, South Korea, Malaysia, Singapore, and Thailand (from the
OSIRIS database) in 2010-2013. Managerial ability were measured using
enterprise efficiency score, earnings management is proxied by discretionary
accruals and real earnings management, as well as investor protection is measured
using five dimensions derived from the World Economic Forum.
With 95 percent confidence level, the findings of this study support previous
findings that managerial ability significant positively related to earnings
management, both for discretionary accrual and real earnings management.
However, this study only found that there are interaction effects between
managerial ability and the investor protection to influence managerial ability on
earnings management, as well as empirical results on the analysis of this study,
for real earnings management. Meanwhile, for the discretionary accrual, there
were no interaction effects between managerial ability and investor protection to
influence managerial ability to earnings management. The level of investor
protection plays a role in mitigating a significant positive effect of managerial
ability on earnings management, for real earnings management.
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