Effect of Managerial Ownership

Oct 13, 2025 by talynt.org 11 views

Effect of Managerial Ownership Structure, Institutional Ownership, Company Size, and Bonus Compensation for Profit Management in Manufacturing Companies The Consumer Goods Industry Sector Registered in the IDX 2012-2014

Introduction

The management of profits in companies is a crucial aspect of business operations, and various factors can influence this process. In the context of the consumer goods industry sector, registered in the Indonesia Stock Exchange (IDX) from 2012 to 2014, this study aims to analyze the effect of managerial ownership structures, institutional ownership, company size, and bonus compensation on earnings management. The use of discretionary accruals with a modified Jones model approach is employed to measure profit management. This study utilizes secondary data from 57 companies listed on the IDX, selected through the purposive sampling method, and analyzes the data using multiple regression with a significance level of 5%, using the SPSS computer program version 20.

Theoretical Background

Earnings management is a practice where companies manipulate their financial statements to achieve certain goals, such as meeting earnings targets or avoiding losses. This practice can be influenced by various factors, including managerial ownership structures, institutional ownership, company size, and bonus compensation. Managerial ownership refers to the number of shares owned by the company's management, which can influence their incentives to manage profits in accordance with the interests of shareholders. Institutional ownership, on the other hand, refers to the shares owned by financial institutions, which can influence company policies and earnings management practices.

Methodology

This study utilizes secondary data from 57 companies listed on the IDX, selected through the purposive sampling method. The data is analyzed using multiple regression with a significance level of 5%, using the SPSS computer program version 20. The modified Jones model approach is employed to measure profit management, which is represented by discretionary accruals.

Results

The results of this study indicate that simultaneously, managerial ownership variables, institutional ownership, company size, and bonus compensation have a significant influence on earnings management. Partially, managerial ownership variables, institutional ownership, and bonus compensation also show a significant effect on earnings management, while company size does not have a significant effect.

Effect of Managerial Ownership

Managerial ownership refers to the number of shares owned by the company's management. In this context, the greater the proportion of shares owned by managers, the higher their incentives to manage profits in accordance with the interests of shareholders. This can encourage managers to report better performance, even if it involves managing earnings. Decisions made by managers who have significant ownership can encourage more aggressive earnings management practices, which have the potential to influence the transparency of financial statements.

The Role of Institutional Ownership

Institutional ownership, namely shares owned by financial institutions, also has a significant influence on earnings management. These institutions tend to be more active in overseeing management and having the power to influence company policies. With institutional ownership, companies may be more careful in managing profits so as not to cause dissatisfaction among institutional investors who pay attention to long-term performance.

Company Size

The company's size refers to the total assets or company income. This study found that company size had no significant effect on earnings management. This can be caused by the fact that large companies may have greater resources to manage profits, but this is not always translated into better earnings management practices. In addition, large companies also usually get more supervision from the public and regulations, thereby reducing incentives to manage earnings.

Bonus Compensation

Bonus compensation related to performance also shows a significant effect on earnings management. Bonuses given to managers often depend on the achievement of certain earnings targets, encouraging them to carry out earnings management to achieve these goals. The use of compensation schemes that emphasize short-term results can increase the likelihood that managers take unethical steps in managing earnings to meet the specified expectations.

Conclusion

Overall, this research provides important insights on how the company's internal factors can affect earnings management practices. Understanding the influence of ownership and compensation structure in the context of earnings management is very important for investors, regulators, and academics to create a more transparent and responsible business ecosystem. It also highlights the need for companies to consider management policies and more ethical compensation schemes, in order to prevent practices that can harm future stakeholders.

Recommendations

Based on the findings of this study, the following recommendations are made:

Companies should consider the ownership structure and compensation schemes to prevent earnings management practices.
Institutional investors should pay attention to the ownership structure and compensation schemes of companies to ensure that they are transparent and responsible.
Regulators should establish regulations to prevent earnings management practices and ensure that companies are transparent and responsible.
Academics should continue to research on earnings management practices and their effects on companies and stakeholders.

Limitations

This study has several limitations, including:

The study only focuses on the consumer goods industry sector registered in the IDX from 2012 to 2014.
The study only uses secondary data from 57 companies listed on the IDX.
The study only analyzes the effect of managerial ownership structures, institutional ownership, company size, and bonus compensation on earnings management.

Future Research Directions

Future research should focus on the following areas:

The effect of other factors on earnings management practices, such as corporate governance and audit committee effectiveness.
The impact of earnings management practices on company performance and stakeholders.
The development of more effective regulations to prevent earnings management practices.

By understanding the effect of managerial ownership structures, institutional ownership, company size, and bonus compensation on earnings management practices, companies and stakeholders can create a more transparent and responsible business ecosystem.
Frequently Asked Questions (FAQs) on the Effect of Managerial Ownership Structure, Institutional Ownership, Company Size, and Bonus Compensation for Profit Management in Manufacturing Companies The Consumer Goods Industry Sector Registered in the IDX 2012-2014

Q: What is the main objective of this study? A: The main objective of this study is to analyze the effect of managerial ownership structures, institutional ownership, company size, and bonus compensation on earnings management in manufacturing companies in the consumer goods industry sector registered in the IDX from 2012 to 2014.

Q: What is earnings management? A: Earnings management is a practice where companies manipulate their financial statements to achieve certain goals, such as meeting earnings targets or avoiding losses.

Q: What are the factors that influence earnings management? A: The factors that influence earnings management include managerial ownership structures, institutional ownership, company size, and bonus compensation.

Q: What is managerial ownership? A: Managerial ownership refers to the number of shares owned by the company's management.

Q: How does managerial ownership influence earnings management? A: Managerial ownership can influence earnings management by encouraging managers to report better performance, even if it involves managing earnings.

Q: What is institutional ownership? A: Institutional ownership refers to the shares owned by financial institutions.

Q: How does institutional ownership influence earnings management? A: Institutional ownership can influence earnings management by encouraging companies to be more careful in managing profits to avoid dissatisfaction among institutional investors.

Q: What is company size? A: Company size refers to the total assets or company income.

Q: How does company size influence earnings management? A: Company size does not have a significant effect on earnings management, as large companies may have greater resources to manage profits, but this is not always translated into better earnings management practices.

Q: What is bonus compensation? A: Bonus compensation refers to the bonuses given to managers based on their performance.

Q: How does bonus compensation influence earnings management? A: Bonus compensation can influence earnings management by encouraging managers to carry out earnings management to achieve certain earnings targets.

Q: What are the implications of this study? A: The implications of this study are that companies should consider the ownership structure and compensation schemes to prevent earnings management practices, and that institutional investors should pay attention to the ownership structure and compensation schemes of companies to ensure that they are transparent and responsible.

Q: What are the limitations of this study? A: The limitations of this study are that it only focuses on the consumer goods industry sector registered in the IDX from 2012 to 2014, and that it only uses secondary data from 57 companies listed on the IDX.

Q: What are the future research directions? A: The future research directions are to analyze the effect of other factors on earnings management practices, such as corporate governance and audit committee effectiveness, and to investigate the impact of earnings management practices on company performance and stakeholders.

Q: What are the practical implications of this study? A: The practical implications of this study are that companies should consider the ownership structure and compensation schemes to prevent earnings management practices, and that institutional investors should pay attention to the ownership structure and compensation schemes of companies to ensure that they are transparent and responsible.

Q: What are the policy implications of this study? A: The policy implications of this study are that regulators should establish regulations to prevent earnings management practices and ensure that companies are transparent and responsible.