The Effect of Financial Distress, Firm Value, and Investment Opportunity on Earnings Management With Sales Growth as Moderating

Abstract

This study measures the effect of Financial Distress, Firm Value, and Investment Opportunity on
Earnings Management with Sales Growth as Moderation. The method used in this study is a
regression moderation analysis by testing the earnings management model produce a better
sensitivity analysis of earnings management practices. The sample in this study is public
companies listed on the Indonesia Stock Exchange (IDX) in 2018-2022, namely the basic and
chemical industry, miscellaneous industries, and the consumer goods industry. The results of the
study show that (1) Financial Distress has a positive effect on the Earnings Management Model
Kothari et al. (2005). (2) Firm Value has a positive effect on the Earnings Management Model
Kothari et al. (2005). (3) Investment Opportunity does not affect both Earnings Management
Models (4) Sales Growth reinforces the positive effect of Financial Distress, Firm Value, and
Investment Opportunity on both Earnings Management Models. (5) Leverage has a positive
effect on the Earnings Management Model Kothari et al. (2005). (6) Firm Age has a negative effect
on both Earnings Management Models. It can be concluded that Dechow et al.'s Earnings
Management Model. (1995) and Kothari et al. (2005) produced an incomplete sensitivity analysis
(mixed result). The results of the coefficient of determination - Adjusted R2 Earnings Management
Model Dechow et al. (1995) are higher than the Kothari et al. model. (2005). While the results of
the t-test of the Earnings Management Model Kothari et al. (2005) produce a better probability
when compared to Dechow et al.'s Earnings Management Model. (1995), except for the
Investment Opportunity variable, which does not affect either Earnings Management Model.