The Integrity of soes Financial Statements: CAN GCG, DER, and KAP Reputation Affect it?

Abstract

Purpose: This study has three aims First, to analyze whether Good Corporate Governance (GCG) and Leverage Ratio (DER) affect the Financial Reports with integrity (IGFS) of SOE. Second, to examine whether reputation of the Public Accountant Firm (RPAF) can strengthen or weaken the influence of GCG and DER and the effect DER on IGFS. The third is to examine whether DER is intervening variable in the effect of GCG on IGFS.   Theoretical framework: This study based on agency theory.  Agency theory shows a conflict of interest and information asymmetry between management as an agent and the stakeholders as a principal. Financial reports is a result from an accounting process can be used as a communication tool between management and stakeholders regarding financial data from company activities   Method/design/approach:  The data in this study are 20 SOES listed JSX from 2017-2021. Data processing uses Eviews 13 because the kind of data is a data panel. Indicator of GCG are audit committee (AUDC), the proportion of independent commissioners (PIDC), the proportion of managerial share ownership (PPMO), and the proportion of institutional ownership (PINO). Leverage ratio using DER (Debt to Equity Ratio) and The Reputation of Public Accountant Firm use The Big Four and Non the Big Four. Hance Financial Reports with integrity (IGFS) as a dependent variable was measured by the market-to-book value ratio.   Results and conclusion: The results concluded that indicator GCG only AUDC affect the Financial Report with integrity. The result also shows that AUDC and PPMO affected DER. Variable Reputation of Public Accountant Firm (RPAF) weakens the influence of AUDC on DER. The result of this study found that DER effect the IGFS but not as intervening variable.   Research implications: This research implies that the policy of selecting audit committees in SOEs is very essential in maintaining the integrity of financial reporting and managing debt.   Originality/value:  The novelty in this research includes moderating and intervening variables in one research model.