The impact of financial characteristics and audit quality on earnings management: Evidence on the moderating role of managerial ownership
Keywords:
Earnings management, Leverage, Cash holdings, Firm size, Audit quality, ProfitabilityAbstract
Earnings management may reduce the reliability of financial reporting and affect stakeholders’ decisions. This study examines the effects of leverage, cash holdings, firm size, audit quality, and profitability on earnings management, with managerial ownership acting as a moderating variable. Using data from 18 manufacturing companies listed on the Indonesia Stock Exchange during 2019–2024 (108 firm-year observations), the study applies Moderated Regression Analysis (MRA). The results show that cash holdings positively and significantly affect earnings management, while leverage, firm size, audit quality, and profitability have no significant effects. Managerial ownership weakens the relationship between cash holdings and earnings management but does not moderate the effects of the other variables. These findings suggest that liquidity plays an important role in earnings management practices, while managerial ownership can help mitigate opportunistic behavior associated with excess cash resources.
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