Proceedings of the International Conference on Economics, Finance & Business, Vienna

DOES PRESIDENTIAL ELECTION MATTERS? EARNINGS MANAGEMENT STUDY IN INDONESIA

HUBERT SEBASTIAN TANDIANTO, FELIZIA ARNI RUDIAWARNI

Abstract:

This study investigates the correlation between earnings management and presidential elections in Indonesia. Prior research has demonstrated that general elections have a detrimental effect on the practice of earnings management at State-Owned Enterprises (SOEs). The objective of this study is to examine the impact of presidential elections on the practice of earnings management in Indonesia, specifically focusing on SOEs. A study was carried out utilizing a sample of 63 Indonesian companies that are listed on the Indonesia Stock Exchange (IDX), out of which 21 are SOEs. The study spanned over a period of 5 years. It aimed to investigate the impact of presidential elections in the years leading up to the election, the election year itself, and the years after the election. Our empirical research shows that presidential elections harm the practice of real earnings management in both SOEs and non-SOEs. Additionally, we observe a significant increase in the prevalence of earnings management before the election period compared to the period following the election. The discovery indicates a substantial increase in pressure caused by political events, such as the presidential election. These findings provide a reference point for future studies and aid in anticipating earnings management practices during prospective political events, particularly presidential elections.

Keywords: Earnings Management, Election, Stated Owned Enterprises, Political pressure

DOI: 10.20472/EFC.2024.020.010

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