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http://dx.doi.org/10.13106/jafeb.2021.vol8.no6.0179

The Effect of Firm Size, Debt, Current Ratio, and Investment Opportunity Set on Earnings Quality: An Empirical Study in Indonesia  

HASANUDDIN, Rusdiah (Department of Accounting, STIE YPUP)
DARMAN, Darman (Department of Administration Science, Sekolah Tinggi Administrasi Bina Taruna)
TAUFAN, Muhammad Ybnu (Faculty of Teacher Training and Education, Universitas Tomakaka)
SALIM, Agus (Faculty of Economics & Business, Department of Islamic Economics, Universitas Muhammadiyah Makassar)
MUSLIM, Muslim (Department of Accounting, Faculty of Economic & Business, Universitas Muslim Indonesia)
PUTRA, Aditya Halim Perdana Kusuma (Department of Management, Faculty of Economic & Business, Universitas Muslim Indonesia)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.6, 2021 , pp. 179-188 More about this Journal
Abstract
The quality of earnings refers to the proportion of income attributable to the core operating activities of a business. This study analyzes the effect of the variable firm size, the leverage ratio as manifested by the debt-to-equity ratio, the liquidity ratio exemplified by the current ratio, and the investment opportunity set (IOS) on earnings quality. The study subjects are IPO companies engaged in the food and beverage sector with a study observation period using secondary data (financial statements), namely in 2016-2019, totaling 17 companies. Several stages of testing are carried out to answer statistical analysis (eg, normality test, heteroscedasticity test, multicollinearity test, T-test, and F-test) then the final testing stage is the regression test. These results of this study explain that the firm size, leverage ratio, does not contribute to earnings quality. Liquidity positively contributes to earnings quality. IOS also contributes to earnings quality. This study assumes that company management prefers to carry out earnings management to maintain their firm value. Besides, large companies make it possible to generate greater profits in the future. Thus, the market to book value of the equity ratio affects earning quality.
Keywords
Firm Size; Debt to Equity Ratio; Current Ratio; Investment Opportunity Set; Earnings Quality;
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