The Effect of Profitability, Dividend Policy, Institutional Ownership, and Managerial Ownership on Earnings Management in Infrastructure Companies Listed on the Indonesia Stock Exchange

This study examines the effect of profitability, dividend policy, institutional ownership, and managerial ownership on earnings management within Indonesia’s infrastructure sector, a critical industry with unique dynamics during the 2020–2024. Employing a quantitative approach with panel data regression using the Random Effect Model (REM), the analysis utilizes data from 23 infrastructure companies listed on the Indonesia Stock Exchange, yielding a total of 115 observations. Earnings management, serving as the dependent variable, is measured using Discretionary Accruals (DAC). In contrast, the independent variables comprise Return on Assets (ROA), Dividend Payout Ratio (DPR), Institutional Ownership (IO), and Managerial Ownership (MO). The results indicate that profitability positively and significantly affects earnings management, suggesting that more profitable firms tend to engage in earnings manipulation. Conversely, managerial ownership exhibits a negative and significant effect, implying its role as an effective internal governance mechanism in constraining earnings management practices. In contrast, dividend policy and institutional ownership show no significant partial effect. Collectively, all independent variables have a substantial joint influence on earnings management. These findings highlight the dual role of internal factors, where profitability acts as a driver. At the same time, managerial ownership is a crucial mitigating mechanism in earnings management practices within the infrastructure industry.