The Impact of The CG Scorecard on Earning Management with Firm’s Characteristics as a Variable Intervening

Abstract

This study aims to examine the effect of the CG Scorecard on Earnings Management with company characteristics as an intervening variable. The population and sample are public companies in Indonesia and Malaysia listed on the Asean Star Index, 2016-2018. CG Scorecard is measured using the ASEAN Score Card, earnings management is measured based on the accrual of working capital to sales while intervening variables are measured using company characteristics through leverage. The analysis model is the Structural Equation Modeling Partial Least Square (SEM PLS). The results showed that the direct relationship between GCG variables with earnings management is smaller than the relationship between GCG and earnings management through leverage variables. These results conclude that although in the short term investors do not really value the leverage rate as an investment indicator, if high debt comes from capital and continues to increase, it can be used as a signal for principals because it can be indicated earnings management actions occur. Therefore good corporate governance is one factor that can reduce agency conflict, thereby minimizing earnings management actions.