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This is a Quantitative Study study.

November 1, 2025Open Access

Corporate Governance and Profitability on Earnings Management in Indonesian Infrastructure Firms: The Role of Leverage

Puntos clave

Earnings management is significantly affected by leverage and audit firm size, with notable implications for corporate governance.
Key findings indicate that leverage mediates the relationship between profitability and earnings management, implying critical governance dynamics.
Structural equation modeling analysis emphasizes the roles of independent commissioners and profitability in earnings practices.
Research highlights the importance of financial reporting quality in debt-dependent sectors like infrastructure.

Resumen

This study investigates the influence of profitability, audit firm size, and the proportion of independent commissioners on earnings management, with leverage as a mediating variable. The research focuses on companies in the infrastructure sector listed on the Indonesia Stock Exchange (IDX) between 2017 and 2022. Employing a managerial balance sheet perspective and structural equation modeling, the study finds that audit firm size, independent commissioners, and leverage significantly affect earnings management. Profitability and audit firm size also influence leverage. Furthermore, leverage mediates the relationship between profitability and earnings management and partially mediates the relationship between audit firm size and earnings management. These findings offer valuable implications for improving corporate governance and enhancing the quality of financial reporting, especially in sectors highly dependent on debt financing.

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