Do Political Connections, Ownership Structure, and Audit Quality Affect Earnings Management?

Abstract

This study aims to determine the effect of political connections, ownership structure (managerial ownership and institutional ownership), and audit quality on earnings management. Earnings management in this study is measured by discretionary accruals using the modified Jones model. By purposive sampling, this study gets 262 non-financial companies listed on Indonesia Stock Exchange from 2017 to 2019 as samples (786 observations). This study uses generalized least square panel data regression for testing the hypotheses. The results indicate that political connections have a positive effect on earnings management, while managerial ownership, institutional ownership, and audit quality have a negative effect on earnings management.