PENGARUH MANAGEMENT MUTU TERPADU TERHADAP KINERJA

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SIMPOSIUM NASIONAL AKUNTANSI 9 PADANG flexibility to management in choosing accounting method as long as it does not make a dysfunctional decision different from Standar Akuntansi Keuangan. Accounting method that chosen by management for a certain objective at will, is known as earnings management. If management can not reach earnings target, management will utilize that flexibility to modify the published earnings. Management is motivated to show a good performance in producing value or maximal profit for company, so it tends to choose and use accounting method that will give a better earnings information. Asymmetry information gives possibility to management to do an earnings management. Richardson’s (1998) found a positive relationship between asymmetry information and earnings management. Management can increase the value of the firm through additional information disclosure in financial statement but this addition will decrease asymmetry information so that their chance to do an earnings management is being smaller. This supports Lobo and Zhou (2001) that stated that earnings management and financial statement disclosure level has negative relationship. A company doing earnings management will disclose smaller information in their financial statement to prevent its detection. But an opposite possibility, if earnings management is done to communicate information and to increase the value of the firm, the relationship should be positive. Standar Akuntansi Keuangan (SAK) gives a flexibility to choose accounting method. This flexibility can be utilized to produce different earnings and can give an impact on their earnings quality, especially for public companies that have to publish their financial information to market or society. From that information, the market reaction will be known and then will be revealed through its stock price. Earnings quality can be indicated as an ability of earnings information in giving response to market. In other words, the reported earnings have power of response. Strong market response on earnings that is showed from a high earnings response coefficient (ERC) shows that the earnings have a good quality. Scott (2000), Cho and Jung (1991) said that ERC measures how big the stock return will respond the published earnings. In other words, ERC is a reaction on publicized earnings that shows the earning quality. The fluctuation of ERC is based on responsive strength that is revealed from information (good/bad news) that is brought by earnings. ERC is a measure or proxy that is used to measure the quality of earnings. (Collins et al., 1984; Lee and Park, 2000; Kross and Schroeder, 1990). Padang, 23-26 Agustus 2006 K-INT 05 10
SIMPOSIUM NASIONAL AKUNTANSI 9 PADANG Everyone has self-interested behavior that support managers to manipulate the published company performance for their own interest (Morris, 1987). Jensen and Meckling (1976) and also Watts and Zimmerman (1986) said that this action is known as earnings management as one form of agency problem that happens because of different interest between shareholders and management in maximizing their own utility. In agency theory, management will choose a certain method to get earnings that will support their motivation. This will influence the quality of published earnings, because this amount does not reveal the real economic condition. This idea is supported by the research results of Subramanyam (1996), Pae (1999), Sankar (1999), Feltham and Pae (2000), and also Teixeira (2002). Their results give a conclusion that earnings management can influence the published earning quality. Indicator being used in measuring the earnings management is abnormal accruals under working capital accrual approach of Peasnell et al. (2001). Based on that research, this research model is in Figure 1 and the hypothesis is as follows: Ha= There is an influence of earnings management on earnings quality Insert Figure 1 Here III. RESEARCH METHODOLOGY A. Data Collection and Sampling Sample of this research was manufacturing firms listed on the Jakarta Stock Exchange. This research used pooled data for years 2002-2004. The analysis units were 459 (153x3) manufacturing companies (Enclosure 1). Choice of samples used purposive sampling method under some criteria: 1) still be operated until December 2004, and routinely published its financial report, 2) never been unlisted from the Jakarta Stock Exchange, 3) never stops its stock exchange activities, never stops the operation and never merges with another firm, 4) never change its industrial sector status, and 5) has financial report ended at December 31 Data was collected from the Jakarta Stock Exchange, website of Jakarta Stock Exchange, UGM Database and JSX Monthly Statistics, Capital Market Directory 2002-2004, JSX corner STIE Malangkuçeçwara Malang, JSX Fact book, yearly/monthly JSX Statistics, BAPEPAM report, and JPMI. Padang, 23-26 Agustus 2006 K-INT 05 11
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PENGARUH MANAGEMENT MUTU TERPADU TERHADAP KINERJA

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