Effect of Institutional Ownership and Managerial Ownership on Corporate Financial Performance: Mediating Earning Management.

This study was intended to obtain empirical evidence of the effect of Institutional Ownership and Managerial Ownership on Corporate Financial Performance through Earning Management. Using the Path Analysis method for banks listed on the Stock Exchange, there is evidence that Institutional Ownership and Managerial Ownership influence Corporate Financial Performance through the mediation of earnings management. Both of these variables negatively affect earnings management, and earnings management has a negative influence on the company's financial performance. That is every increase in managerial ownership and institutional ownership increases, causing a decrease in earnings management, while a decrease in earnings management can increase the company's financial performance. This study succeeded in proving in the banking sector that earnings management can be suppressed by a self-control mechanism to reduce the effect of agency theory, among others by (1) ownership of company shares by the manager (managerial ownership); (2) share ownership by institutions (institutional ownership). This study also proves that the firm size and audit committee control variables have no significant effect on the company's financial performance.