Title:
The Effect of Information Asymmetry and Profitability on Real Earnings Management

Authors:
Syallomitha Tiara Kusuma, Sri Hastuti, Sri Wahyuni Widiastuti, Indonesia

Abstract:

This research aims to determine the effect of information asymmetry and profitability on real earnings management. The research method used is quantitative with annual report data from a sample of manufacturing firms listed on the Indonesia Stock Exchange in 2016-2020 which were selected based on purposive sampling. The number of samples used in this study was 515 firm-years. The hypothesis was tested by multiple linear regression test. The findings found in this research are the independent variables, namely information asymmetry, which has a significant effect on real earnings management with abnormal Cash Flow Operations (Abn CFO) and abnormal production costs (Abn PROD), but has no significant effect on real earnings management with abnormal discretionary expenses (Abn DISC). Profitability has a significant effect on real earnings management with the three proxies (Abn CFO, Abn PROD, and Abn DISC). However, if the research focuses on firms suspecting real earnings management, information asymmetry has an effect on earnings management with the Abn DISC. 

DOI: http://dx.doi.org/10.51505/ijebmr.2022.6903