Do Financial Reporting Quality and Corporate Governance Have Simultaneous Effect? Evidence from Indonesian Manufacturing Companies

Authors

  • Dianwicaksih Arieftiara Fakultas Ekonomi Universitas Negeri Surabaya http://orcid.org/0000-0001-8364-2153
  • Sidharta Utama Post Graduate program of Accounting Science Economic and Business Faculty Universitas Indonesia

DOI:

https://doi.org/10.26740/jaj.v9n2.p168-185

Keywords:

Corporate governance, Earnings timelines, Ownership concentration, Quality of financial reporting, Transparency.

Abstract

Financial reporting reflects transparency of the firm and if it could not explain the changes in shareholders value in a timely manner; shareholders need additional monitoring mechanism. This study aims to investigate the effect of financial statements quality on corporate governance mechanism and to examine the simultaneous effect between both. This study uses earnings timelines as a proxy of financial reportings quality; proportion of independent board and board size as proxies of corporate governance mechanism. Using Two Stage Linear Regression (TSLS) and samples consist of manufacturing companies listed on Indonesian Stock Exchange (IDX) in 2015, this study finds that earnings timelines have significant influence on board size; earnings timelines and proportion of independent board have the simultaneous effect; however, it fails to document the simultaneous effect of earnings timelines and ownership concentration. This study is the first that investigates the simultaneous effects of financial reporting quality and corporate governance.

References

Adams, R. B., & Ferreira, D. (2007). A Theory of Friendly Boards. The Journal of Finance, 62(1), 217250. DOI: doi:10.1111/j.1540-6261.2007.01206.x

Alimehmeti, G., & Paletta, A. (2012). Ownership concentration and effects over firm performance: Evidences from Italy. European Scientific Journal, ESJ, 8(22).

Armstrong, C. S., Guay, W. R., & Weber, J. P. (2010). The role of information and financial reporting in corporate governance and debt contracting. Journal of Accounting and Economics, 50(2-3), 179234. DOI: doi:10.1016/j.jacceco.2010.10.001

Ball, R., & Shivakumar, L. (2005). Earnings quality in UK private firms: comparative loss recognition timeliness. Journal of Accounting and Economics, 39(1), 83128. doi:10.1016/j.jacceco.2004.04.001

Beatty, A., Ramesh, K., & Weber, J. (2002). The importance of accounting changes in debt contracts: the cost of flexibility in covenant calculations. Journal of Accounting and Economics, 33(2), 205227. doi:10.1016/s0165-4101(02)00046-0

Beatty, A., Ramesh, K., & Weber, J. (2002). The importance of accounting changes in debt contracts: the cost of flexibility in covenant calculations. Journal of Accounting and Economics, 33(2), 205227. DOI: doi:10.1016/s0165-4101(02)00046-0

Burgstahler, D. C., Hail, L., & Leuz, C. (2006). The Importance of Reporting Incentives: Earnings Management in European Private and Public Firms. The Accounting Review, 81(5), 9831016. DOI: doi:10.2308/accr. 2006.81.5.983

Bushman, R., Chen, Q., Engel, E., & Smith, A. (2004). Financial accounting information, organizational complexity and corporate governance systems. Journal of Accounting and Economics, 37(2), 167201. DOI: doi:10.1016/j.jacceco.2003.09.005

Chan, K. C., & Li, J. (2008). Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert-Independent Directors. Corporate Governance: An International Review, 16(1), 1631. doi:10.1111/j.1467-8683.2008.00662.x

Chi, L.-C. (2009). Do transparency and disclosure predict firm performance? Evidence from the Taiwan market. Expert Systems with Applications, 36(8), 1119811203. DOI: doi:10.1016/j.eswa.2009.02. 099

Claessens, S., Djankov, S., & Lang, L. H. . (2000). The separation of ownership and control in East Asian Corporations. Journal of Financial Economics, 58(1-2), 81112. DOI: doi:10.1016/s0304-405x(00)00067-2

Dechow, P. M., & Dichev, I. D. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77(s-1), 3559. DOI: doi:10.2308/accr.2002.77.s-1.35

Dimitropoulos, P. E., & Asteriou, D. (2010). The effect of board composition on the informativeness and quality of annual earnings: Empirical evidence from Greece. Research in International Business and Finance, 24(2), 190205. DOI: doi:10.1016/j.ribaf.2009.12.001

Fama, E. F., & Jensen, M. C. (1983). Separation of Ownership and Control. The Journal of Law and Economics, 26(2), 301325. DOI: doi:10.1086/467037

Fanani, Z. (2009). Kualitas Pelaporan Keuangan: Berbagai Faktor Penentu Dan Konsekuensi Ekonomis. Jurnal Akuntansi Dan Keuangan Indonesia, 6(1), 2045. DOI: doi:10.210 02/jaki.2009.02

Felo, A. J., Krishnamurthy, S., & Solieri, S. A. (2003). Audit Committee Characteristics and the Perceived Quality of Financial Reporting: An Empirical Analysis. SSRN Electronic Journal. DOI: doi:10.2139/ssrn. 401240

Givoly, D., Hayn, C. K., & Katz, S. P. (2010). Does Public Ownership of Equity Improve Earnings Quality? The Accounting Review, 85(1), 195225. DOI: doi:10.2308/accr. 2010.85.1.195

Jung, K., & Kwon, S. Y. (2002). Ownership structure and earnings informativeness. The International Journal of Accounting, 37(3), 301325. DOI: doi:10.1016/s0020-7063 (02)00173-5

Kusumawati, D. N., & Riyanto, B. (2005). Corporate governance dan kinerja: analisis pengaruh compliance reporting dan struktur dewan terhadap kinerja. Simposium Nasional Akuntansi, 8, 248-261.

La Porta, R., Lopez-De-Silanes, F., Shleifer, A., & Vishny, R. (2002). Investor Protection and Corporate Valuation. The Journal of Finance, 57(3), 11471170. DOI: doi:10.1111/1540-6261.00457

Linck, J., Netter, J., & Yang, T. (2008). The determinants of board structure☆. Journal of Financial Economics, 87(2), 308328. DOI: doi:10.1016/j.jfineco.2007.03.004

Nuryaman (2008), œPengaruh Konsentrasi Kepemilikan, Ukuran Perusahaan, dan Mekanisme Corporate Governance Terhadap Manajemen Laba, Paper Presented at the SNA 11th Pontianak.

Nuryaman, N. (2009). Pengaruh Konsentrasi Kepemilikan, Ukuran Perusahaan, Dan Mekanisme Corporate Governance Terhadap Pengungkapan Sukarela. Jurnal Akuntansi Dan Keuangan Indonesia, 6(1), 89116. DOI: doi:10.21002/jaki.2009.05

OECD. (1999), œBenchmarking Knowledge-Based Economies, OECD Science, Technology and Industry Scoreboard 1999.

Petra, S. T. (2006). The Effects of Corporate Governance on the Informativeness of Earnings. Economics of Governance, 8(2), 129152. DOI: doi:10.1007/s10101-006-0018-8

Rachmawati, A., & Triatmoko, H. (2007), œAnalisis Faktor-Faktor yang Mempengaruhi Kualitas Laba dan Nilai Perusahaan, Paper Presented at the SNA 10th Makasar.

Siregar, S. V. N., & Utama, S.( 2006). Pengaruh Struktur Kepemilikan, Ukuran Perusahaan, dan Praktek Corporate Governance terhadap Pengelolaan Laba (Earnings Management),. Journal Riset Akuntansi Indonesia Vol 9 No. 3. Hal 307, 326.

Sloan, R. G. (2001). Financial accounting and corporate governance: a discussion. Journal of Accounting and Economics, 32(1-3), 335347. DOI: doi:10.1016/s0165-4101(01)000 39-8

Suranta, E., & Midiastuty, P. P. (2005). Corporate Governance, Earnings, dan Return Saham. Simposium Riset Ekonomi II.

Susanto, S., & Siregar, S. V. (2012). Corporate Governance, Kualitas Laba, dan Biaya Ekuitas: Studi Empiris Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia Tahun 2009. Simposium Nasional Akuntansi XV.

Vafeas, N. (2000). Board structure and the informativeness of earnings. Journal of Accounting and Public Policy, 19(2), 139160. DOI: doi:10.1016/s0278-4254(00)00 006-5

Wardhani, R., & Joseph, H. (2010). Karakteristik Pribadi Komite Audit dan Praktik Manajemen Laba. Simposium Nasional Akuntansi XIII, 1-26.

Wawo, A. (2010), œPengaruh Corporate Governance dan Konsentrasi Kepemilikan Terhadap Daya Informasi Akuntansi, Paper Presented at SNA 13th Purwokerto.

Downloads

Published

2018-04-28

How to Cite

Arieftiara, D., & Utama, S. (2018). Do Financial Reporting Quality and Corporate Governance Have Simultaneous Effect? Evidence from Indonesian Manufacturing Companies. AKRUAL: Jurnal Akuntansi, 9(2), 168–185. https://doi.org/10.26740/jaj.v9n2.p168-185
Abstract views: 1524 , PDF Downloads: 1015