Title: The effect of earnings management with special item to investment decision: empirical study at manufacture firm listed in Indonesia Stock Exchange 2008-2010

Authors: S. Rahmawati; Sri Wahyu Agustiningsih; Erna Setiany

Addresses: Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami No. 36A, Kentingan, Surakarta, 57126, Indonesia ' Faculty of Economics, Universitas Veteran Bangun Nusantara, Jl. Letjend. Sujono Humardani No. 1, Sukoharjo, 57521, Indonesia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl. Ir. Sutami No. 36A, Kentingan, Surakarta, 57126, Indonesia

Abstract: The purpose of this study is to examine the effect of earnings management with special items (material items that rarely appear, which are significantly different from a company's main business activity) on investment decisions. Earnings management is measured with special items and investment is measured with capital expenditure. Samples of this study are manufacture firms that are listed in Indonesian Stock Exchange 2008-2010. As a purposive sampling, the secondary data of 47 financial reports of firms are selected. The data are collected from financial reports and Indonesian Capital Market Directory. The result of a regression test is inconsistent with the hypothesis proposed that earnings management with special item does not affect a company's investment decision. This result indicates that manufacturing firms in the research period do not use classification shifting of earnings management. The control variables in this research are cash flow and investment value of previous year (t − 1) that affects investment decisions.

Keywords: earnings management; special items; investment decisions; manufacturing industry; Indonesia; financial reports.

DOI: 10.1504/IJMEF.2015.070777

International Journal of Monetary Economics and Finance, 2015 Vol.8 No.2, pp.111 - 125

Available online: 23 Jul 2015 *

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