Title: The influence of intellectual capital on earnings management through real activities manipulation in Indonesian manufacturing companies

Authors: Nuryaman; Eriana Kartadjumena; Sendi Gusnandar Arnan

Addresses: Accounting Department, Widyatama University, Indonesia ' Accounting Department, Economic Faculty, Widyatama University, Indonesia ' Accounting Department, Economic Faculty, Widyatama University, Indonesia

Abstract: This study examines the influence of intellectual capital (IC) on earnings management through real activities (EMTRA) manipulation in Indonesian manufacturing companies. This study measured IC elements by employing the value added intellectual capital (VAIC™) model developed by Pulic (1998) that consists of human capital, structural capital, and capital employed efficiencies. Meanwhile, earnings management was measured by employing the Roychowdhury' model (2006), which is known as EMTRA manipulation. EMTRA manipulation is conducted on activities of sales operation, reduction of cost discretion, and over-production. This study analysed data from 69 financial statements of Indonesian manufacturing companies that are listed on the Indonesia Stock Exchange in 2016. The result shows that the integration of intellectual capital elements can reduce earnings management behaviour through sales operation activity manipulation. Moreover, partially, the intellectual capital of capital employed and structural capital efficiencies can lower the practice of EMTRA of cost discretion.

Keywords: intellectual capital; IC; earnings management through real activities; EMTRA; Indonesia.

DOI: 10.1504/IJEBR.2019.102724

International Journal of Economics and Business Research, 2019 Vol.18 No.3, pp.277 - 291

Received: 18 Aug 2018
Accepted: 01 Oct 2018
Published online: 02 Oct 2019 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article