Research Article
Economic Policy Uncertainty and Manager’s Choices to Switch-off Between Earnings Management Strategies: Evidence from Indonesia Capital Market
@INPROCEEDINGS{10.4108/eai.4-11-2022.2328480, author={Yeni Januarsi}, title={Economic Policy Uncertainty and Manager’s Choices to Switch-off Between Earnings Management Strategies: Evidence from Indonesia Capital Market}, proceedings={Proceedings of the International Conference on Sustainability in Technological, Environmental, Law, Management, Social and Economic Matters, ICOSTELM 2022, 4-5 November 2022, Bandar Lampung, Indonesia}, publisher={EAI}, proceedings_a={ICOSTELM}, year={2023}, month={9}, keywords={economic uncertainty covid19 pandemic accrual earnings management (aem) to real earnings management (rem)}, doi={10.4108/eai.4-11-2022.2328480} }- Yeni Januarsi
Year: 2023
Economic Policy Uncertainty and Manager’s Choices to Switch-off Between Earnings Management Strategies: Evidence from Indonesia Capital Market
ICOSTELM
EAI
DOI: 10.4108/eai.4-11-2022.2328480
Abstract
This study investigates whether the uncertainty environment influences manager to choose between earnings management strategy in Indonesia, Southeast Asia's largest economy. The current study uses ordinary least squares clustered by firm and year and incorporating 200 firm-year observations from all industries except finance and banking from 2012 to 2020. Current study discovered that economic uncertainty causes managers to shift from AEM to REM. This result robust for several alternative measurements of earnings management and economic uncertainty. Furthered investigation finds that the effect of EPU on earnings management switch-off is more evidenced in high leverage firms and income increasing firms. Current study implies that uncertainty environment become manager’s drivers to engage in REM more likely than AEM and create a costly environment in order to produce reliable financial statements.