Effect of Corporate Governance on Relationship Between Corporate Social Responsibility and Firm Size with Earnings Management
Gemi Ruwanti (a*), Grahita Chandrarin (b), Prihat Assih (b)
a)Management Deapartment, STIE Indonesia Banjarmasin
Jl. Brigjen Hasan Basry 11-12 Banjarmasin, Indonesia
*gemi[at]stiei-kayutangi-bjm.ac.id
b)Graduate Program, Universitas Merdeka Malang
Jl. Terusan Dieng 62-64 Malang, Indonesia
Abstract
The study aims to examine the effect of corporate social responsibility and firm size on earnings management, and examine the role of corporate governance as a moderating variable in the relationship between corporate social responsibility and company size with earnings management. The variable corporate social responsibility is measured by the amount of CSR costs, and the size of the company is measured by total assets. Corporate governance is measured by the proportion of independent commissioners. The concept of earnings management that adopts the Modified Jones Model developed by Dechow et al. (1995) measured using a discretionary accruals proxy. The study samples are manufacturing company listed on the Indonesia Stock Exchange for the period 2014-2017. The analysis technique uses Moderated Regression Analysis (MRA). The results of the analysis show that corporate social responsibility and company size have a significant positive effect on earnings management. Companies that report corporate social responsibility tend to do earnings management. Corporate governance weakens the relationship between corporate social responsibility and earnings management, which means that companies that are socially responsible, are willing to spend effort and resources to carry out corporate social responsibility activities and strive to meet the ethical expectations of shareholders to the community, which tends to limit practice earnings management so that it will provide more transparent and reliable financial information to investors. Corporate governance weakens the relationship between the size of the company and earnings management. The larger the company as measured by total assets tends to reduce earnings management actions.
Keywords: corporate social responsibility, firm size, corporate governance, earnings management
Topic: International Conference of Islamic Economic and Financial Inclusion