The effect of financial characteristics on earnings management moderated by corporate governance

The case for earnings management has often been made by companies that aim to improve company performance. The concept of Good Corporate Governance is applied to reduce various risks in earnings management, therefore, this study aims to empirically test whether there is an effect of profitability leverage and free cash flow on earnings management, as well as whether good corporate governance approached by self-assessment can moderate the effect of leverage, profitability, and free cash flow on earnings management in state-owned enterprises. The data used is secondary data from the Indonesian stock exchange and the company’s website. The population of this study is stateowned companies listed on the Indonesian Stock Exchange in 2013-2019. The data analysis technique used moderated regression analysis. The results showed that leverage and free cash flow influenced earnings management, while profitability has no effect on earnings management and self-assessment can moderate the effect of leverage on management and self-assessment cannot moderate the effect of profitability and free cash flow on earnings management.