Title: The effect of political connection and earnings management on management compensation

Authors: Riky Rizki Junaidi; Sylvia Veronica Siregar

Addresses: Faculty of Business and Economics, Universitas Indonesia, Indonesia ' Faculty of Business and Economics, Universitas Indonesia, Indonesia

Abstract: This research aims to examine the direct effect of political connection and earnings management on management compensation as well indirect effect of political connection on management compensation through earnings management. There are three measures of earnings management used in this research, namely accrual, real, and aggregate earnings management. Samples of this research are non-financial companies listed in Indonesia Stock Exchange in the period of, 2014-2016 with 337 observations. We find that real earnings management has a significant positive effect on management compensation. However, there is no evidence that political connection has any effect on earnings management nor political connection on management compensation. Moreover, there is no evidence on the indirect effect of political connection on management compensation through earnings management.

Keywords: political connection; earnings management; management compensation.

DOI: 10.1504/IJBG.2020.109828

International Journal of Business and Globalisation, 2020 Vol.26 No.1/2, pp.92 - 118

Received: 01 Oct 2018
Accepted: 01 May 2019
Published online: 25 Sep 2020 *

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