The Influence of Managerial Ownership, Institutional Ownership, Company Growth Toward Earning Management and Its Implication on Quality of Financial Reporting

Abstract

Abstract. Financial reporting contains the disclosure of financial information to the various
stakeholders about the financial performance and financial position of the organization over
a specified period of time. The financial reporting should be reliable and relevant. It is
required by each and every stakeholder for multiple reasons and purposes. By enhancing
financial reporting quality, it can reduce information asymmetries.
This study examines the influence of managerial ownership, institutional ownership,
company growth toward earning management and its implication on quality of financial
reporting for a manufactures company in which listed in The Indonesian Stock Exchange
(IDX). The manager who engage in ownwership aims to equalize the interests of managers
with shareholders. Institutional ownership is as share ownership by external parties in the
forms of institutions or groups. A company growth generates significant positive cash
flows or earnings and tends to have profitable investment. Information about earnings has
an important role for interested parties in a company and in turn this lead the quality of
financial reporting.
This research is as casual study, and the explanatory research within descriptive and
verification approach is used as research method. Using the secondary data with primary
resource of annual audited financial statement of the company. The sample selection was
done by purposive sampling technique with 24 samples of manufacture companies listed in
IDX during 2011-2015. The hypotehesis test is conducted using Partial Least Square
(SEM-PLS).
The research result shows empirical evidence that managerial ownership and company
growth influence toward earning management, while institutional ownership did not
influence the earning management. Managerial ownership, institutional ownership, and
company growth did not influence the quality of financial reporting. Earning management
infuence the quality of financial reporting. Managerial ownership influence the quality of
financial reporting through earning management. Institutional ownership and company
growth through earning management did not influence the quality of financial reporting.

Keywords: managerial ownership, institutional ownership, company growth, earning
management, quality of financial reporting.