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THE EFFECT OF CORPORATE GOVERNANCE ON EARNINGS QUALITY: EVIDENCE FROM INDONESIAN BANKING COMPANIES
Last modified: 2017-08-21
Abstract
This paper aims to analyze the effect of corporate governance on earnings quality of banking companies that listed on Indonesia Stock Exchange during 2013-2015. The study divides corporate governance mechanism to external and internal. Internal corporate governance is measured by the effectiveness of board of commissioners and the effectiveness of audit committee. Meanwhile, external corporate governance is measured by audit quality that consists of size and tenure of public accountant companies. In addition, earnings quality is measured by discretionary accruals from Beaver and Engel (1996). Using market to book ratio, size, return on assets, and leverage as controlling variables, the results show that the effectiveness of audit committee has a positive significant effect on earnings quality. However, the effectiveness of board of commissioners, audit tenure, and audit size do not have significant effects on earnings quality.
Keywords
corporate governance; earnings quality; banking; audit quality; the effectiveness of board of commissioners; the effectiveness of audit committee; audit tenure; audit size
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