Board Remuneration, Remuneration Committee, and Earnings Management in a Two-Tier System for Company Sustainable Development

This study aims to analyze the effect of directors' and board of commissioners' remuneration on earnings management using the remuneration committee as a moderating variable. Using a sample of Indonesian non-financial companies from 2014 to 2023 and using multiple regression analysis and moderated regression analysis, we found that directors' remuneration has a positive effect, while the board of commissioners' remuneration has a negative effect on earnings management. The remuneration committee negatively moderates the effect of directors' remuneration and positively moderates the effect of the board of commissioners' remuneration on earnings management. These results also remain consistent when using alternative measurements and the endogeneity test. We found many companies do not yet have a remuneration committee, so corporate governance can still be improved. This study has practical and theoretical contributions to increasing knowledge about agency theory, earnings management, and factors that can align the interests of directors, boards of commissioners, and shareholders so that the company's sustainable development can continue to be improved.