Analysis of the impact of Leverage, Value Added and Size on Earning Management and Financial Performance of Indonesian Shariah Banking

The main issues of researches about earnings management have been conducted extensively. Nowadays, the scope of research on earning management is extended to business fields based on Islamic finance. So this research objective is to determine the influence of value added, leverage and size on Shariah banking financial performance through earning management. Discretionary Accrual in Modified Jones Model is used in this research to measure earning management. Then, indicator Return On Asset is used in measuring shariah banking financial performance. Based on data of 12 shariah banking in Indonesia for the period 2012 to 2017, the study conduct path analysis model with Smart-PLS. After conducted the analysis test, this study provide the evidence that value added, leverage and size have no significant effect on Return On Asset. For earning management, both leverage and size have significant effect on earning management otherwise value added has no significant effect on earning management. Finally, earning management significantly act as intervening variable between leverage, size to return on asset but have insignificant result in the relationship between value added and return on asset. Keywords—earning management, financial performance, leverage, value added, size, shariah bank.