Earnings management is a global issue and a rising concern in Indonesia. This study aims to examine how leverage and firm size influence earnings management. The objective of the paper is to analyze the moderating effects of foreign and institutional ownership on those relationships within the infrastructure sector. The research methodology applies panel data regression on 160 firm-year observations from publicly listed infrastructure companies in Indonesia between 2020–2023, using the Kothari performance-matched model to measure discretionary accruals. The general findings show that leverage and firm size have a significant and positive effect on earnings management. Foreign ownership significantly weakens the effect of leverage, suggesting stronger external monitoring, while institutional ownership surprisingly strengthens it, possibly due to passive monitoring behavior. Neither ownership type significantly moderates the relationship between firm size and earnings management. These results reinforce agency theory and emphasize the nuanced role of ownership structure in influencing reporting quality.
Gani et al. (Fri,) studied this question.
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