Is the board of directors associated with earnings management strategy? The role of the audit committee

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Abstract

Most management companies focus on their profitability in many kinds of ways. This research aims to examine the association between board of directors meetings and the gender of the board of directors on earning management. In addition, this research has novelty by adding a moderating variable, namely the audit committee. The population is companies listed on the Indonesia Stock Exchange (IDX). The sampling technique uses a stratified random sampling technique. There were 87 companies as the total sample. The observation period was three years so the total analysis units were 261. Data analysis was carried out with the WarpPLS application. The results show board of directors meetings and gender diversity do not affect earnings management. Meanwhile, the audit committee can moderate the influence of director gender diversity on earnings management. However, the audit committee is unable to moderate the influence of board of directors meetings on earnings management. This research provides empirical evidence that earnings management does not depend on the number of board meetings or the gender of the directors. Therefore, this research contributes to company policy to improve the effectiveness of the audit committee in implementing good corporate governance. Good corporate governance can suppress earnings management.

Keywords: Earnings Management, Board of Directors, Audit Committee

Authors’ individual contributions: Conceptualization — D.S., R.H., and S.R.B.; Methodology — D.S. and I.N.K.; Software — D.R.; Validation — S.R.B.; Formal Analysis — D.S. and R.H.; Investigation — D.R. and I.A.; Resources — S.A.A.N. and F.T.R.; Writing — Original Draft — R.H. and I.A.; Writing — Review & Editing — S.R.B. and S.I.H.; Supervision — D.S. and R.H.; Project Administration — S.A.A.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M1, M4, M37

Received: 28.02.2024
Accepted: 27.06.2024
Published online: 01.07.2024

How to cite this paper: Suryandari, D., Hidayah, R., Ranihusna, D., Aulia, I., Basher, S. R., Kayati, I. N., Hasna, S. I., Nugraha, S. A. A., & Rohmah, F. T. (2024). Is the board of directors associated with earnings management strategy? The role of the audit committee. Corporate Board: Role, Duties and Composition, 20(2), 8–19. https://doi.org/10.22495/cbv20i2art1